Bitcoin’s Price May Jump to “Just Above Mining Costs” After Halving
50 days remain until Bitcoin’s halving, but the debates around the influence of the event on Bitcoin’s price have been going on for a long time. While some people are sure that the halving is already priced in, others believe that the halving can push Bitcoin (BTC) to the Moon.
For context, the halving occurs every four years, reducing Bitcoin’s block reward by half. The forthcoming May halving will cut the block reward from 12.5 to 6.25 Bitcoins per block, and supply inflation from 3.72% to 1.79%. A recent Kraken report had noted that it is the first time Bitcoin’s inflation would decrease below the 2% inflation level set by most central banks for their respective fiat currencies.
The chart above illustrates the performance of Bitcoin after its previous two halvings. The first halving occurred on November 28, 2012, when the price was $12.50, while the second halving occurred on July 9, 2016, when the price of Bitcoin reached $650.
According to the data presented, Bitcoin’s price has always seen bullish movement over the long-term after halving events. However, Bitcoin may not behave in the same way this year due to the economic turmoil caused by the coronavirus pandemic. But, as many institutional investors turn to crypto market in recent times, the impact of 2020’s halving might possibly show whether previous Bitcoin bull runs were really caused by the block reward halving, or they were just a coincidence.
Popular trader Peter Brandt recently tweeted that the impact of the block reward halving is not so important for BTC’s price. He described Bitcoin’s halving as “grossly overrated”. In fact, several days ago, Mike Novogratz, CEO of Galaxy Digital, had also noted that when the direction of Bitcoin’s price is considered, it is always a “confidence game”.
Notably, on a recent podcast, Bitcoin miner and cryptocurrency investor Kris, being someone who has got skin in the game, presented his forecasts for the forthcoming halving. Noting that there were a lot of new elements in the Bitcoin ecosystem now on the institutional end, he assured that the price of Bitcoin will jump after the halving, not to $20,000, but to $9,000-$12,000, “just above the mining costs”.
This is an important observation, as many believe that Bitcoin’s struggling price, joined with the forthcoming block reward halving, could bring a fortune to miners, especially smaller ones, since they won’t even reach the breakeven point, which will force them to quit mining entirely or sell their rigs to larger pools.
If the price of Bitcoin will indeed stay “just above the mining costs” after the halving, miners will be more incentivized to stay in business.
He concluded by maintaining:
“If you look at the market now and any seasoned trader[….], when a trader sees that a coin is getting pumped by a market maker, or the coin is trying to inflate itself or trying to build the value, it gets traded. Cause you know it’s going to go up. You know you can keep dumping on.”
50 days remain until Bitcoin’s halving, but the debates around the influence of the event on Bitcoin’s price […]