It really is amazing to see Bitcoin moving in a positive direction for the first time in a very long time. But when you are in the crypto industry for some time you will realize that anything can still happen in this market.
There is however some aspects from the past and the way that the Bitcoin network was designed which we have to take into account in order to see what might happen in the next year or so.
The next Bitcoin halving is expected to happen around May 2020
The bitcoin network has been designed to work against inflation and every 210 000 Blocks, the amount of Bitcoin created or printed reduces by 50%. This usually works out to around every 4 years.
Approximately 12.5 Bitcoins is currently being printed per block which works out to around 1 800 new Bitcoins per day. These Bitcoins are being split between the miners that solves the algorithm correctly. So this means that after the halving which should happen around May 2020, the amount of new Bitcoins per day will reduce to around 900 Bitcoins per day. This will directly impact the amount of Bitcoins earned by miners and for me, this might just be what we need to keep the Bitcoin rally going for the next while.
Here is an extract from a Coin Desk article which was released in December 2018.
As decreasing supply meets constant (or increasing) demand after the halving, prices will inevitably rise to find equilibrium again. The combination of market inefficiency together with the supply reduction shock is what has caused two of bitcoin’s largest parabolic moves.
After the 2012 bitcoin halving, it took the market two months to start feeling the effect of the inflation halving and for bitcoin to initiate a parabolic move that propelled 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 bring it from $582 to $20,000 just one month after the halving.
With the third halving less than 18 months away, It’s time to start paying attention to bitcoin’s killer application again: algorithmically enforced monetary policy. The disruptive power of this monetary policy will start getting priced-in in 2019, and when it does, you want to be here.
The current rise in Bitcoin might be institutional money flowing into the ecosystem or maybe it is not, but what I do know is that history is know to repeat itself.
I always ask myself the question, will Bitcoin still exist in the next few years? The answer which I always give myself is that the network can only exist if there is miners mining Bitcoin. This can only be done when miners run on a profitable basis. if the Bitcoin price is too low, miners cannot make profit and they will obviously switch of their mining rigs.
The only way that miners can run in a profitable manner, is when the price of Bitcoin is higher than it is currently. After the halving it will need to be even higher in order to sustain the network.
I am by no means a financial adviser or even close to be in the position to give financial advice, but I am a logical thinking person and in my opinion there is just to many people which will loose to much when miners cannot operate profitably. There is only one way Bitcoin can go and that is up.
Happy Steeming!
