The upcoming Bitcoin halving is arguably the most talked about and anticipated cryptocurrency event of the year. While both large and small seasoned investors accumulate coins in the run-up to the event, newcomers to the crypto-sphere may be asking; “What in the world is the halving”?
Let us break it down for you.
Bitcoin was born out of ingenuity and resourcefulness. It’s founders witnessed how inflation and corruption crippled global assets, so they put in place measures to protect Bitcoin from such calamities in the future. Therefore, to ensure the longevity of the coin and to curb inflation, they programmed block-halving events into Bitcoin’s code (among other things). Block-halving refers to the number of the new bitcoins generated per block, each halving reduces the reward per block mined by 50% every four years or 210,000 blocks.
In the first four years of Bitcoin’s existence, 50 new BTC were issued every 10 minutes (approx). In the subsequent four years, 25 new BTC were issued every 10 mins, and so forth. This year, on May 12th 2020, the block-halving will decrease rewards from the current 12.5BTC to 6.25 BTC.
This exponential depreciation in newly generated bitcoins has a profound effect upon the supply chain and the market as a whole. One of the most basic principles of macroeconomics states that lower supply with steady demand leads to higher prices. It comes as no surprise that this fundamental law has historically correlated to the cryptocurrency market as well, with the halving preceded by some of Bitcoin’s largest bull runs. In the past, unprecedented gains were achieved in the months following block-halving events. The last halving in 2016 was followed by a record-breaking high of $20,000 per BTC and a break-through into mainstream media making Bitcoin a household name. Some experts are predicting Bitcoin will chart a similar uptrend following this year’s event.
Seasoned crypto investors are cognizant of the impacts that added scarcity can have on the market and have begun speculatively accumulating BTC. Compounding this with an increase in media attention, Bitcoin prices have rallied sharply in the past few weeks leading up the halving event. With prices increasing by over 20% in the last week alone. Institutional interest and engagement in bitcoin and crypto are also at peak levels, creating a perfect environment for another post-halving rally.
Notably, this is the first halving that is taking place amidst a global pandemic- COVID-19, which has shaken the global economy. With all the uncertainty, people around the world are witnessing the fall of central banks and are in search of alternatives like Bitcoin, which has proven its resilience and strength in comparison to Wall Street and other stock markets. As a result, the odds of Bitcoin setting new highs next year look stronger than ever.
With all this being said, block-halving, cryptocurrency, and bitcoin may still seem like a foreign language to many traditional investors. And despite all the gains made in recent years, cryptocurrency and traditional investors still live in very separate worlds. Many traditional investors are apprehensive of Bitcoin and the cryptocurrency market and have yet to invest despite the huge upside potential. So if you are reading this, and currently own zero crypto assets, know that you are not alone. Fear not, there is still time to invest before the halving.
We at Blockchain Academics would never suggest to go all-in on Bitcoin or to invest more than you can afford to lose. However, we are strong proponents of diversification and with such a tremendous opportunity impending, why not invest 1% of your portfolio into BTC?
The Modern Portfolio theory, one of the most widely used models in the financial industry states that
Investors are risk-averse, preferring a portfolio with a higher return for a low level of risk.
Risk can be reduced through diversification.
Since Bitcoin is not correlated to other assets classes in the market, by adding to a traditional portfolio you would increase your diversification and reduce the risk of the overall portfolio.
Therefore, no–coiners, we invite you to take a leap of faith with us. There is no better time than today to diversify your portfolio and enjoy the post-halving ride.
To learn more about investing in cryptocurrency markets visit www.bcacademics.com.
Live countdown: https://www.youtube.com/watch?v=0gt0ByE6oVA