Bitcoin has brought about many changes. Most notably, it introduced the idea of decentralized currency and created a digital asset with strict scarcity, defined by code.
Every four years, there's an event called the 'halving' where Bitcoin's block reward is slashed in two. Although skeptics may dismiss this, seasoned investors view it as a trigger that propels the cryptocurrency market forward.
Case in point, we reported earlier this year A survey indicated that 61% of approximately 2,500 participants anticipate a Bitcoin surge as the halving in May 2020 approaches.
But not everyone is convinced.
CEO's Perspective: Halving May Not Prompt a Bitcoin Boom
In a cryptocurrency mining conference held in Germany, Bitmain's co-founder Jihan Wu conveyed his skepticism about a potential Bitcoin surge following next year's halving.
Despite historical patterns showing bull runs corresponding with substantial Bitcoin price hikes, evident in charts, Wu's doubt remains evident.
Insight into Bitcoin Price Movement with a Focus on Halving Events @StoicTrader_ & @MLescrauwaet pic.twitter.com/89trRlSOqd
— Tuur Demeester (@TuurDemeester) May 16, 2019
Critically, Wu's reservations have a credible basis. A cryptocurrency firm called Strix Levithan from Seattle reveals that upon detailed analysis, halvings may not significantly impact markets with reduced block rewards.
Analysis Research encompassing 32 halving events across 24 cryptocurrencies, including Bitcoin and Litecoin, finds no definitive proof that halving events consistently benefit crypto assets over the broader market before and after a reward cut.
Intriguingly, Strix's findings suggest that halvings might even cast a negative shadow over Bitcoin's market activity leading to the event, contradicting popular narratives on Crypto Twitter.
The buzz around these reward-cutting events often boils down to limited datasets and historical biases, notes Strix.
Price Model Begs to Differ
While Bitcoin's mining pioneers remain uncertain of any post-halving benefits, an acclaimed pricing model indicates reduced inflation might fuel market growth.
As reported by Blockonomi previously A forecast by Munich-based BayernLB predicts the halving could propel Bitcoin to surpass previously reached highs.
In an extensive paper authored Senior Analyst Manuel Andersch elaborates that Bitcoin's shared traits with gold could allow for its price to be approximated using a stock-to-flow model (comparing annual production to current availability).
With next year's block reward chop, the model values Bitcoin at around $90,000 each, asserting that the halving impact isn’t yet reflected in the present price of around USD 8,000.
BayernLB’s framework draws inspiration from one crafted by PlanB, an anonymous quantitative analyst at a European finance institution.
PlanB deduces a strong link between the stock-to-flow model and Bitcoin's market behavior, suggesting a high chance of a post-halving rise.
The analyst turned up a 95% R2 in price-matching accuracy for his model—a figure representing statistical precision, with 100% being perfect and 0% showing no correlation.
