In another 399 days, something big happens to Bitcoin – BTC Halvening, an event that takes place approximately every 4 years on bitcoin blockchain.
If you look at the Bitcoin source code, ‘nSubsidyHalvingInterval’ is set to 210,000, indicates 50% reduction of bitcoins generated every 210,000 blocks(approx. 4 years) as mining rewards.
Bitcoin undergone “halving” on 2012 and 2016, where the Bitcoin rewards were algorithmically reduced by 50%.
Bitcoin miners are currently earning 12.5 bitcoins per block, or approximately 1,800 bitcoins per day. After the halving in May 2020, rewards will drop to 900 bitcoins per day, reducing the daily bitcoin supply on the market drastically.
As decreasing supply meets constant/increasing demand after the halving, prices will inevitably rise to find balance again. The combination of market inefficiency together with the supply reduction shock is what has caused two of bitcoin’s previous largest parabolic moves.
After the 2012 bitcoin halving, it took the cryptocurrency market two months to start feeling the effect of the inflation halving and for bitcoin to initiate a parabolic move that drived its price from $12 to $142.
Interestingly, after the 2016 halving, the market felt the inflation reduction even sooner, this time bitcoin started a rally that would propel it from $582 to $20,000 just one year after the halving.
What do 2012 and 2016 have in common?
If you look at the bitcoin price chart, you will notice that 2012 and 2016 have one more thing in common. The bitcoin price increased significantly the year leading up to the halving. Furthermore, the rally leading up to the halving was in both cases followed by an exponential rise just a few weeks after the halving.
With the next bitcoin halving expected to happen in May 2020, the time has come for investors to start paying attention to this pattern. Historically, the halving starts getting priced in approximately one year before it happens, which would result in bitcoin bottoming out in early 2019 followed by a rally starting in mid 2019.
While the predictions may differ from one another, something is clear: the next bitcoin halving event will play a major role in defining cryptocurrency market conditions for the next four years to come. It is certainly a date to closely monitor for crypto miners, holders, and all crypto enthusiasts out there.