Be it 'halving' or 'halvening', this major event, set to occur in one year's time, will capture the attention of the Bitcoin community. BTC ) investors Bitcoin investors are gearing up for a pivotal event on the horizon.
Assuming current predictions hold steady, by this time next year, the Bitcoin mining reward will drop from 12.5 BTC to 6.25 BTC per block, a 50% cut. This drop means Bitcoin's inflation rate will shrink, dipping below the U.S. Federal Reserve's 2% inflation target for the dollar. Many believe that this shift will trigger a wave of growth in the crypto markets.
The Impending Halving
Predicting asset inflation can be quite tricky. Take the Venezuelan Bolivar for instance. According to Blockonomi's insights into Venezuela's crypto-based charitable efforts, a properly constructed digital asset can give users a precise forecast of future inflation rates.
Kyle Samani from Multicoin Capital clarifies Bitcoin's historical inflation dynamics:
The inaugural halving shrank inflation from 40% to 20%. The next took it from 20% to 10%. The upcoming event will further slice it from around 3.8% to 1.9%.
While we can project Bitcoin's inflation over the next decade with some certainty, the same can't be said for the U.S. dollar. As some skeptics predict, the dollar might experience hyperinflation due to fiscal oversight failures.
This expectation, coupled with supply and demand principles, has led many industry insiders to forecast a bullish run post-halving for Bitcoin's value. Notably, Bloomberg reports a Twitter poll recently found 61% of 2,500 respondents optimistic about a Bitcoin surge by May 2020, alluding to economic fundamentals as the reason for their optimism.
Tuur Demeester from Adamant Capital notes that Bitcoin's previous halvings catalyzed bull markets, marking distinct phases in its market cycles.
Bringing a halving-focused view to Bitcoin's value trajectory. Credit to @StoicTrader_ & @MLescrauwaet pic.twitter.com/89trRlSOqd
— Tuur Demeester (@TuurDemeester) May 16, 2019
Where Could Bitcoin Head Exactly?
How high can Bitcoin climb post-halving? PlanB, a well-recognized Bitcoin data analyst, predicts the 2020 halving to drive Bitcoin’s value well beyond its 2017 peak.
PlanB recently determined According to models, an asset's stock-to-flow ratio is correlated with its market cap. As depicted below, a higher SF ratio often signals a greater asset value. The relationship between SF ratio and price, however, is logarithmic.
Currently, Bitcoin’s SF ratio stands at about 25, akin to silver's SF ratio of 22. But following the next halving, Bitcoin's SF ratio is expected to align more closely with gold’s, reaching 55.
Specifically, BTC's SF ratio is projected to leap from 25 to 50. Models suggest Bitcoin might hit a $1 trillion market cap post-2020 halving, translating roughly to $55,000 per Bitcoin.
Though $55,000 per Bitcoin sounds far-fetched, PlanB speculates that capital currently in silver, gold, negative interest economies, authoritarian states, billionaires seeking economic hedges, and institutional funds will likely flow into Bitcoin.
Some Beg To Differ
Nonetheless, skepticism lingers. Eric Turner, research director at Messari, highlighted to Bloomberg the limited data pool (just two past events) linking halvings to price surges, making statistically meaningful conclusions elusive. Gil Luria, from DA Davidson & Co., concurs:
Pre-known halving events are unlikely to impact Bitcoin’s price as many factors contribute to its valuation.
Yet, the general sentiment predicts a rosy future for Bitcoin over the long haul.
