Conversation | Bitcoin halved, is it really good or fake?

Finishing 丨 Fuji


Operation 丨 One Hundred

It's been less than a week since the arrival of 2020, and there is only half a year left until the Bitcoin block reward is halved.

Since the end of 2018, the cryptocurrency industry has been in the midst of a cold winter. Many will halve their hopes for Bitcoin halved in May 2020. In their opinion, every halving of Bitcoin is good for the market. What's more, some people have launched a series of analysis models to demonstrate the rationality of halving the bull market.

In contrast, some people are pessimistic about the so-called halving market. In their opinion, people's obsession with currency prices has greatly overdrawn the real value brought by the halving. The arrival of the halving does not mean that The arrival of the bull market.

What exactly is the relationship between Bitcoin halving and the price of Bitcoin, and will Bitcoin halving bring benefits to the cryptocurrency industry? On December 26, Shenzhen Chain Finance's new online salon brand "Non-Consensus Dialogue" conducted an in-depth discussion on this issue.

This issue of "Non-Consensus Dialogue" invites Ren DongBit's founder Zhao Dong, Hu Fu's founder Wang Ruixi, and Yuan Yin Mining Pool co-founder Zhu Qian, three seniors in the industry who have gone through several times.

The following is a Q & A and sharing record, which is slightly edited by Deep Chain Finance.

"Having Bitcoin halved, will the price of the currency rise?"

Deep Chain Finance: The total supply of Bitcoin is 21 million, and the time interval of each 210,000 blocks is halved, about once every four years. The block height to be halved next time is 630,000, and the expected time is around May 19, 2020. At that point in time, the block reward will be directly reduced from 12.5 to 6.25. Therefore, many people have expectations for the market next year. For example, former Goldman Sachs partner SpartanBlock predicted that the price of Bitcoin will reach $ 40,000 in 2020.

Dear guests, what effect will this halving of rewards have on the price of Bitcoin? What is your forecast for the market trend in 2020?

Zhao Dong: From a substantive perspective, halving itself does not have much substantial impact on the price of Bitcoin, but it has a speculative effect. Since it is already halving for the third time next year, after that, the annual new supply (new mine) of Bitcoin will fall from 3.7% to 1.7%. Therefore, if the currency price stays the same, Bitcoin's new annual consumption of funds will fall from $ 4.7 billion to $ 2.36 billion. This amount of capital is not a significant impact on the current market value of US $ 132 billion.

In other words, the halving has a certain correlation with the Bitcoin bull-bear cycle, not causality.

Observing the activity of Bitcoin will reveal that, in fact, the price of the currency is often determined by the network effect of Bitcoin itself, not the mining output. Therefore, the price of Bitcoin can be roughly proportional to the square of its active address (network effect).

Therefore, in my opinion, it is the Bitcoin bull-bear cycle (4 years) that exactly coincides with the halving cycle, rather than halving the Bitcoin bull market. For example, the rooster's announcement is related to the rising sun, but the sun does not rise because of the rooster's announcement.

Wang Ruixi: Supply and demand is an important factor affecting the price of bitcoin. This is because, under the condition of constant demand, the reduction in supply will naturally increase the price. But it is worth noting that supply and demand are not decisive. In addition, halving Bitcoin rewards is also a factor.

From the perspective of supply and demand, in the future, the market demand for bitcoin will definitely be increasing. This is because, since the birth of Bitcoin, from the beginning of the niche to now more and more people are gradually known, more and more people in the world recognize Bitcoin. On the one hand, Bitcoin solves some problems that are difficult to solve in the commercial field, such as: financial experience and timeliness of cross-border payments.

But on the other hand, we also need to pay attention to the large number of participants, which will lead to an increase in the price of bitcoin on the one hand and a continuous bubble on the other. And with the slow increase of the existing stock, it has formed a falling effect on the funds on the market. In addition, the halving of Bitcoin is a huge test for all practitioners. In a pessimistic market, the downward trend is more obvious.

2020 may be the darkness before dawn. For the practitioners, the advantages outweigh the disadvantages. In the case of good food reserves, we must continue to improve the breadth and depth of our business.

Zhu Qian: The current halving effect is still positive: first, although the halving is not much reduced, objectively speaking, the supply is clearly reduced; second, at the market level, users still believe that The deep correlation between the expectation of the halving and the price of the currency has not been fundamentally changed, and many people hold this view.

In addition, the currency price is affected by too many factors. The above two factors may not have an impact on the currency price now than other factors, especially some short-term factors. Some of these big companies, big capitals and big opinion leaders have the ability to create short-term negative effects to offset the above two factors.

Therefore, in my opinion, in this process of bear and bull crossing, the current level is only the level of the spring and summer of 2015, and there may not be a so-called small climax in 2020.

"What is the engine of a bull market?"

Deep Chain Finance: It is generally believed that halving bitcoin will bring a bull market, because once the output is sharply reduced and the demand remains unchanged, the price will inevitably rise, which is the judgment logic of many investors.

Observe the trend of bitcoin price, the rise of bitcoin usually appears after halving at least half a year or one year, and it peaks after almost a year. The previous two peaks were December 2013 and December 2017, respectively. . With such a long delay, it is questionable whether there is an inevitable correlation between the so-called Bitcoin market and halving. In 2017's bull market, many views believe that the ICO boom has caused a lot of hot money to flow into digital currencies, rather than halving.

What do you think of the relationship between halving and the bull market? What are the main factors leading to the bull market?

Zhao Dong: From the perspective of liquidity (BTC transaction volume, turnover rate), it is currently the worst time, even worse than last year when the currency price was 3,000 US dollars.

According to common sense, you can make money by buying low and selling high. When there is little demand for bitcoin, the price of bitcoin will go down. On the contrary, the price of bitcoin will go up. At this time everyone needs to think. Is there more or less demand for bitcoin now?

After ten years of development, Bitcoin's growth experience has proven its value.

Therefore, I think that some changes in the economic situation and the international situation may become the real fuse of the next bull market.

Wang Ruixi: In my opinion, halving the relationship with the bull market is not obvious and will not affect the arrival of the bull market. At present, halving has become a community consensus or slogan.

In 2013, major Chinese media, including CCTV, reported bitcoin crazy, which brought the wealth effect to the public, leading to a large number of new users and funds to enter.

You can take a look at the chart of the second half of Bitcoin in July 2016. Obviously, if the halving can bring a bull market, the K line should be clearly reflected.

In my opinion, the most direct factor affecting the bull market is the large number of users and the large amount of funds entering the market. The start of a bull market depends on several factors:

1. The global economy is rising, and hot money has poured into the Bitcoin field;

2. More and more business organizations recognize and publicize;

3. China's attitude towards blockchain is further fermented;

4. The infrastructure in the industry is more sound.

Zhu Qian: We all know that a large part of the value of Bitcoin comes from its own limited total amount, which no one can over-issue. But in fact, the limited amount is basically irrelevant to the people on our site, because Bitcoin will not be mined until 2140.

In fact, bitcoin is still being issued today-new bitcoins are being mined every day. So this thing that actually has a certain inflation rate and advertises a fixed total amount, the current actual inflation rate is an important indicator-is Bitcoin's deflation rate larger or smaller than the dollar? This is critical data.

From this data point of view, the first few halvings are not worth the big books and special books, and the "fixed amount" sought after by the market is at best only its expectations after 100 years.

But this time the situation will change. In this halving, the annual inflation rate of Bitcoin will drop to 1.7%, which will be significantly lower than the inflation rate of most of the fiat currencies we currently know. In 2016, the number was halved at 4.1%, and after the halving seven or eight years ago, it was 12.5%. We have seen that the quantitative change brought by Bitcoin mining and halving has caused a qualitative change in this number.

"" Bitcoin Financialization "Will Control Bitcoin Market?"

Deep Chain Finance: Meltem Demirors, an investment manager responsible for managing CoinShares' $ 1 billion assets, believes that this halving does not necessarily cause the price of bitcoin to rise, because bitcoin now has a strong derivative (futures, options) market. Many people have adopted Profit from trading derivatives, not cash. Derivatives trading eliminates the ability of product producers to set prices, for example, there is an inverse correlation between the rise in oil futures and the decline in actual oil production. She believes that the more financially bitcoin is, the more irrelevant its price is, and the more irrelevant the supply and demand relationship is, the more relevant it is to the macro market.

We are now seeing Matrix and Tiger Fu have launched option products. How do we view the impact of "Bitcoin Financialization" on the Bitcoin market?

Wang Ruixi: The characteristics of each industry are the same, from scratch, from non-professional to professional, and individual to institutional. And each time the industry changes will lead to an increase in user thresholds, from investment innocence to the entry of professional investors, the general trend is this.

The size and volume of the derivatives market in the securities market is higher than the spot market. It helps users avoid some risks through futures and options, increases market liquidity, and promotes market stability.

Zhao Dong: I think that the derivatives market can objectively increase the market supply of bitcoin and fiat currency at the same time, increase the market liquidity, so to some extent, it can suppress the volatility of bitcoin and increase the stability of bitcoin, so From the perspective of the long-term healthy development of the market, the derivatives market has a positive effect on Bitcoin in general.

In the derivatives market, the starting point was originally used as a tool for risk hedging, but in fact, some exchanges not only failed to hedge the risk, but also became an important source of risk. To get the market on track, the instrumental nature of the derivatives market must be used, not the nature of risk gambling.

In addition, I personally do not recommend white users to try financial derivatives, because the original purpose of derivatives is to hedge risks rather than just an investment vehicle. As a speculative instrument, the derivatives market will simultaneously amplify participants' returns and risks. But because Xiaobai users do not have good risk control, the derivatives market is basically a casino for Xiaobai users.

Objectively speaking, retail investors prefer to go long rather than short in the contract market, and shorts can only be made by some institutions or large households. Therefore, risk control is very important. I can't help but play derivatives. We must understand that small gambling is easy and big gambling is easy to die.

Zhu Qian: Financial service providers with a large amount of bitcoin pledged assets actually have some short-term ability and motivation for bitcoin at some key points in time. At the same time, Bitcoin mining has an impact on the long-term price trend of Bitcoin.

The long-term impact on the market is basically two aspects: first, the promotion of financial products can increase the exposure of bitcoin; second, the products of such companies can reduce the risk, and invest in bitcoin for large off-market funds that risk aversion And mining opportunities.

"Will a mine disaster happen in 2020?"

Deep Chain Finance: Regarding the halving market in 2020, some people think this is a big bet. According to the current increasing speed, when the halving next year, the computing power may reach a record between 140E and 150E. And if the price of bitcoin is still maintained at $ 7,200, it means that after halving, the income is about $ 3,600. At the time of the last Bitcoin price of about $ 3,600, the computing power of the entire network was only between 40E and 45E. This is likely to put unprecedented pressure on Bitcoin miners, when most mining machines will be reduced to scrap iron, and eventually the pressure will be transmitted to the mining machine manufacturers. In your opinion, the market is not up to expectations, will there be a large-scale mining disaster?

Zhu Qian: In my opinion, in addition to the entire network's computing power (mining difficulty), the decline in revenue (decrease in currency price) and the proportion of mining machinery also have an impact on the occurrence of mining disasters.

The first is the difficulty of mining. When the halving period has not yet begun, if there is no major movement in the currency price, in my opinion, it is difficult to achieve a computing power of 140E to 150E. I think the computing power should be maintained at around 120E. So from the perspective of difficulty increase, I don't think there will be a mine disaster.

The second is revenue. From the perspective of currency prices, it should be unlikely that there will be a decline of more than 50%. So beyond the halving, miners will not have a direct gain.

The last angle is the actual situation of the mining machine. Logically speaking, difficulty and currency price are the reasons, and mining mechanism is the result.

The mining machine is a problem of joy and worry. The shutdown of the old machine is unbearable, but the new machine benefits from the shutdown. And from the perspective of the customer base of the Coin Printing Mining Pool, the majority of users hold new machines, and many miners also hold new and old machines at the same time. Therefore, to a certain extent, the shutdown of large-scale old machines may not be considered a mine disaster.

Personally, 100% of the S9 shutdown is considered the beginning of the mine disaster. After all, the old S9 miners have either returned to N times as long as they have already, or they know that they ca n’t get back at the high price (the reason why they ca n’t return is because of the high price at the beginning of 2018, not the so-called mining disaster this round), and the new S9 miners are mostly at very low prices Short-term operation after the purchase, speculative nature is strong, it does not matter that the mining disaster.

In short, S9's positioning and history have caused it to exit a large number of waves; however, the withdrawal of S9 is not a mine disaster. This is because the S9 was released in September 2016 and is already considered as a long standby. Already.

Zhao Dong: My experience is that the cost of mining is not the determinant of the currency price, but the factor of the miner's game.

First of all, miners are mining because bitcoin can be sold. People who buy bitcoin don't care if the cost of producing a bitcoin is 30,000 or 50,000.

Therefore, from the perspective of short-term currency prices, I think that the possibility of large-scale "mine disasters" cannot be ruled out. This happened in late 2014 and early 2015. At that time, most mining machines on the market would be shut down when the price of bitcoin fell below 1500, but in fact, the price of the coin fell to 900 at that time before it began to stabilize and rise.

Therefore, I remind everyone to pay attention to the short-term risks of currency prices, and I am extremely optimistic about the medium and long-term. In the short term, we must take precautions against risks and deal with the impact of possible currency price drops.

Wang Ruixi: In my opinion, the so-called mining disaster will not occur in theory, and the fluctuation of computing power may increase.

There are several reasons:

1. The miner's survivability is very strong, just like Xiaoqiang (褒义) who can't die, will find a more suitable living environment;

2. In fact, the game of the entire industry line is more complicated: computing power, cost, time, price, judgment of the industry and financial instruments all affect survival;

3. Mining machine manufacturers and miners have experienced more fluctuations, and to some extent have adapted to the difficult living environment, so they will moderately adjust the rhythm of forward and backward, leaving sufficient ammunition and waiting for the opportunity;

4. From the perspective of the Bitcoin system, miners are a guarantee of Bitcoin network security and a part of everyone's confidence in Bitcoin. In the event of a mining disaster, a coin disaster has also emerged, and the market is constantly adjusting. But it does not rule out the occurrence of the Black Swan incident.

"What about halved BCH and BSV?"

Deepchain Finance: Litecoin has been halved this year, and mining rewards have dropped from 25 LTC per block to 12.5 LTC, but the price has also halved, from a maximum of 145 US dollars to today's 40 US dollars and a hash rate of 523 / S dropped to 150 / S, a drop of nearly 70%.

"Half the market" seems to be a short-lived one for Litecoin. What do you think of this phenomenon? Next year, BCH, BSV and other coins will also be rewarded in half. How do you view the market trend of these competing coins?

Zhu Qian: Litecoin's halving price encountered the entire cryptocurrency down, and soon became the end of the crossbow. After all, Litecoin's total market value is only 2% of Bitcoin, and it seems unrealistic to try to pull the entire market alone.

During the Litecoin mining disaster, Litecoin's computing power decreased by 40%, but this is not the real reason for Litecoin to face a mining disaster. The real reason, in my opinion, is the single type of Litecoin miner.

Everyone's mining machine has the same model or similar performance. The electricity cost is high, and the lower electricity cost will not be shut down. This is the real mining difficulty.

Therefore, I think that the S9 shutdown is not a real mining disaster. New mining machine models such as the Shenma M20 series, the core motion T3 series, and the Avalon 11 series are still relatively healthy.

Regarding the halving of BCH and BSV, I will briefly summarize: if the sub-mainstream currency of the same algorithm is halved before the mainstream currency, the consequences are unthinkable, and there may be a large wave of decline by then.

Wang Ruixi: Halving is only a catalyst. In the existing stock, there is no capital to enter the market. Litecoin is also difficult to change the downward trend. It is very difficult to get out of the downward trend.

Zhao Dong: It is better to look at the past than to predict the future. From the bitcoin trend in 2016, we can see that in the half year before the halving, due to the market ’s "good" expectations, everyone gradually bought, the currency price will slowly rise, and it will rise faster when it is halved. After halving, due to the "good" If implemented, the currency price will plummet. After the plunge, the market continued to rise slowly until it broke a new high.

The future is not easy to predict, but it is better to refer to the past than to have no reference. But it doesn't make much sense to halve other POW currencies, because there is hardly any currency that just needs BTC.

This article was originally created by Deepchain Finance (ID: deepchain-eva). Reproduction without authorization is prohibited.