Analysis: why Bitcoin will rise periodically around halving

With less than 3 months, Bitcoin will usher in a third halving in May 2020. Now that the price of Bitcoin has exceeded $ 10,000 again, everyone is looking forward to this halving.

The total supply of Bitcoin is 21 million. Bitcoin's block mining reward is halved for every 210,000 block rewards. According to the interval of Bitcoin's block output of about 10 minutes, the halving interval is about every four years. The initial reward per block was 50 Bitcoins. After two halvings, the current reward per block is 12.5 Bitcoins. The next halving block height is 630,000, and the expected time is May 2020. At that point in time, the block reward will be directly reduced from 12.5BTC to 6.25BTC, which means that 900BTC is newly issued every day.

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There are two views in the market:

(1) Bitcoin output will rise madly after halving, because it has been the same for the first two times. In 2012, the mining reward changed from 50 Bitcoins to 25 Bitcoins, and the price increased by nearly 8200% in one year. In the 18 months after the second halving in 2016, the price of bitcoin rose by more than 2200%, with each bitcoin approaching $ 20,000.

(2) This halving does not necessarily increase, and has nothing to do with the market, because history will not simply repeat. If the bitcoin market is just a zero-sum game market, it is a silly market, then this conclusion is correct: as long as future events are determined, the game market has fully reflected, and when everyone knows this information, there is no chance Now, this is the efficient market hypothesis.

I am more inclined to the first view that Bitcoin will rise sharply before and after halving, and I have more reasons to support :

1.Bitcoin output rose before halving, due to the imbalance between supply and demand caused by the game

Because of the halving event, many people who want to sell (such as miners) may wait for a sell-off before and after the halving occurs, which will lead to a decrease in the supply of bitcoin on the market. On the contrary, the demand does not decrease (pay , Application, Hodler, fixed investment), and demand may increase (some people buy because of halving expectations). Therefore, this stage is a rising game.

2. When the Bitcoin production halving occurred (and the following months), the adjustment period was due to the profit-taking after the game ended.

When the halving occurs, the previous game is over (it will end early in a full game), and those who regret the sale in the previous period will throw it out in large numbers, and those who have profited in the previous period may also throw it out, resulting in increased market supply. On the demand side, the part of the demand that was bought in the previous period due to halving expectations will disappear. In this way, the price of Bitcoin may fall back or go sideways.

3.Bitcoin production will continue to increase about one year after the halving of bitcoin production is due to the decrease in actual supply and the effect of making money

The adjustment when the halving is completed is short-term, and it will be digested in a few months. No one will raise the halving market anymore. The subsequent rise was not due to gaming. The normal demand for bitcoin is there, and the output is halved, and each block is only 6.25 BTC. If this supply and demand relationship is established, the price of bitcoin will rise to reach the dynamic balance of supply and demand. Because of rising prices, demand will be suppressed, while mining rewards will not change.

Because of human greed and fear, more people will enter under the effect of making money later, causing the effect of capital disk (that is, foaming), so the price may rise even higher. Of course, the bubble cannot last long, and there will be a sharp decline after it bursts. However, even if the bubble bursts, it cannot be denied that the bitcoin market is gradually growing and the price rise performance under the relationship of supply and demand, otherwise the low point that will not fall after the bubble burst is always higher than the high point of the previous bubble . This halving effect is weaker than once, and the halving effect diminishes until the halving effect disappears.

If market efficiency improves, 1 and 2 may disappear, but 3 will not disappear, because 3 is the real change in supply and demand.