If you’ve perused Crypto Twitter at all over the past few months, you likely know of the Bitcoin halving meme. For those unaware, the halving, or the block reward reduction, is when the number of BTC issued each and every block (approximately every 10 minutes) gets cut in half to preserve BTC’s disinflationary characteristic. The next one of these events, which take place around every four years, is slated to take place in May 2020.
While this event, as just stated, as yet to come, many have made the joke that the Bitcoin ‘halving’ is already here: since peaking at $14,000 in June, the leading cryptocurrency has tumbled by over 50%, 53% to be exact, to $6,700.
The #Bitcoin halvening means the inflation, not the price right?
— R.Heart's forking ETH. HEX.com 40% APR 1759x @526d (@RichardHeartWin) November 25, 2019
This is evidently a dramatic decline, especially when you considering that in June the majority of investors and analysts were saying that Bitcoin was going to surge past its previous all-time high of $20,000 by the end of the year.
Real Halving’s Coming… And it’s Bullish for Bitcoin
While the price of Bitcoin is looking bearish — hyperbearish, some may say — the real halving is coming. And analysts say that this fundamental event could have a resounding effect on the cryptocurrency market.
Munich-based financial institution Bayerische Landesbank (BayernLB), for instance, has predicted that the halving will give Bitcoin to fuel to jet past its previous all-time highs.
In an extensive paper authored by senior analyst Manuel Andersch, it was explained that due to its characteristics and similarities to gold, Bitcoin’s price might be able to be fairly predicted by a stock-to-flow (new yearly supply over above-ground supply of a commodity) model.
Der @BayernLB-Währungsanalyst Manuel Andersch stellte das StockToFlow vor: Nach dem "Powerlaw" soll BTC bis 2025 nochmal verhundertfachen. Die Berechnungen waren atemberaubend und hielten das Publikum im Bann. Ist das verrückt oder sind 1 Million Euro für Bitcoin möglich? pic.twitter.com/ODDI9zboYm
— Crypto49er (@Crypto49ers) November 16, 2019
The model says that once Bitcoin’s block reward reduction is cut in half next year, the cryptocurrency will have a fair valuation of $90,000 per coin, implying that “the forthcoming halving effect has hardly been priced into the current Bitcoin price of approximately USD 8,000.”
Bayerische Landesbank’s prediction was derived from that of PlanB, a European quantitative analyst that has delved into the Bitcoin space. His model, which fits Bitcoin to a 99.5% R2 (meaning extremely accurate), predicts that should Bitcoin continue to follow the model to an eerie degree of accuracy, BTC could reach over $100,000 a pop after 2020’s halving event.
Photo by Mathilda Khoo on Unsplash