Bitcoin Halving 2020 & its Impact on Bitcoin Price, Explained

The Bitcoin Halving 2020 is one of the most discussed and much-awaited events of the crypto space. The magnitude of this highly anticipated event could be gauged by the number of searches people made of the phrase ‘Bitcoin Halving.’ According to Google Trends, the search this term was reached to record high in the 11 years history of Bitcoin. This event takes place after approximately every four years and results in halving the total bitcoin production. According to past events and people narrative, Bitcoin Halving is a bullish event, and probably give a significant push to the bitcoin price. However, this current situation is significantly changed from the past Bitcoin Halving events and may disappoint the crypto community.

What is Bitcoin Halving?

The concept of Bitcoin emerged against the prevalent centralized system. And to eliminate the prominent drawbacks like the inflation of the current financial system, Satoshi Nakamoto, the alleged founder of Bitcoin, incorporated a phenomenon known as ‘Bitcoin Halving’ in its original protocol. This protocol cuts down the production of bitcoin in half after mining every 210,000 blocks, and consequently, it also reduces the BTC reward by 50% that miners receive for verifying each block. This is the thrid Halving event since Bitcoin’s inception in 2009.

This concept was initially included to curb the oversupply of Bitcoin in the market. Unlike Fiat currency, Bitcoin has a cap of 21 million, which means only 21 million bitcoin will be ever produced, and can not be changed in any situation. The limited supply of bitcoin ensures that it is almost immune to inflation. The Bitcoin Halving plays a vital role in ensuring that Bitcoin remains a deflationary asset. 

Impact on Bitcoin Halving on its Price

Crypto community has high expectations with this third Bitcoin Halving event that will occur on around 13th May, 2020. Considering the past scenario and prevalant narrative, the Halving event may skyrocket the price of bitcoin. However, things have been consierably changed since its last halving in 2016. Some analysts predict that Bitcoin Halving 2020 will have minuscule to no impact on its price. 

Positive Impact:

After the first Bitcoin Halving in 2012, BTC price initially increased from $11 to $12. But it did not halt at $12, the price skyrocket to $1,038, a 9,336% increase in just one year after this event took place. Likewise, after mining of next 210,000 blocks, the second Bitcoin Halving occurred in 2016. This event briefly boosted the price by around 20%, and after 1 year, 288% of growth noticed in the price of bitcoin. If we contemplate on the effect of this event on bitcoin price, it gives a positive sign. Although the current situation is entirely different from 2016 and price may not increase in three digits, it may still provide a significant raise.

Currently, people are buying and piling up Bitcoin like never before. As per the trend analysis by Glassnode, the major Bitcoin investors are in bear market mode and stocking up up the bitcoin at the price what they consider as a great buying opportunity. 

The Fear & Greed Index further solidifies this aggressive buying trend of bitcoin. According to this index, the bitcoin price is at ‘Extreme Fear,’ which means it could be an excellent opportunity to invest in Bitcoin. These factors would lead to an overselling of Bitcoin and, consequently, a significantly low supply of bitcoin in the market. The crunch of bitcoin result in low supply and increased demand, and as per the simple economics, it would give a boost to the price of Bitcoin. 

Negative Impacts:

The past Bitcoin Halving events have seen a massive increase in its price, but the Bitcoin Halving 2020 may not repeat the same trend this time.

The first bitcoin Halving had reduced the reward from 50 BTC to 25 BTC per block. While the second dropped the reward given to the miners for each block from 25 BTC to 12.5 BTC. The Bitcoin Halving 2020 will decrease the reward currently miners are receiving for verifying one block. After the mining of 210,000 blocks that are expected to happen on 13th May 2020, the miners will receive 6.25 BTC for each block. Despite the fact that mined bitcoin volume will be reduced significantly after this event, it will not have much impact on its price. As compare to 2016, there are millions of bitcoin are trading on a daily basis. 

Moreover, as per the current price fluctuation, a chance of drastic movement in a very short time is not possible. Although the bitcoin price is gradually moving towards a new high of this month, it has not seen a strong bullish movement.

Also, in comparison to the circumstances surrounded the last halving event, the current market has been drastically evolved with tools and information current bitcoin price movement and future prediction. In addition, the current plunge of derivative and stocks market, and global recession caused by the outbreak of Coronavirus, it uncertain to expect a price movement like that of 2016. 

Take Away

It is difficult to make an accurate prediction about the BTC price after Bitcoin Halving 2020 event. The current circumstances are entirely different from the last two events. The high anticipation and expectation of people may influence the mood of the market and push the price to a new high after the halving. At the same time, the extreme uncertainties caused by the future of the global financial market due to coronavirus outbreak and awareness of people about bitcoin price fluctuation may not impact its price as we have seen after the Halving event in the past.

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