The Bitcoin price has enjoyed some strong bullish momentum since the Coronavirus havoc that took it all the way down to $3,800 on some exchanges, but as we approach the halving, the overall sentiment is that the price will dump in the short term. While there are some valid points that bears are making, including decreased security from an exodus of miners, and a propensity for whales to ‘sell the news’ around big events like this, there is a strong case to be made for why the price will pump.
Daily Selling Pressure will be Reduced by $8.37 Million
Currently 1,800 bitcoin get created each day and distributed to miners, who for the most part, sell immediately to cover their operational cost. At the current price of $9,300 this generates about $16,740,000 in selling pressure each day, just from miners selling.
|Halving Date||BTC/USD||Daily BTC produced||Price of BTC produced Daily Before Halving||Daily BTC Selling Pressure reduction After Halving|
|May 2020||$9,300||1,800 to 900||$16,740,000||$8,370,000|
|July 2016||$250||3,600 to 1,800||$2,340,000||$1,170,000|
|Nov 2012||$12||7,200 to 3,600||$86,400||$43,200|
Similarly, after the halving, 900 bitcoin will be created each day and, for the most part, sold immediately to cover operational costs. This amounts to a reduction of $8,370,000 in selling pressure each day from miners activity alone.
This reduction of $8,370,000 means that, if all else remains equal, only half the amount of ‘new money in’ is required to keep the price consistent. If the amount of ‘new money in’ stays consistent, then the price will move upwards.
This time it’s different
The last halving occurred in July 2016 when the price of Bitcoin was around $650 each. This took the daily selling pressure from $2,340,000 to $1,170,000 Bitcoin if we assume that miners sold all of their Bitcoin as it was mined.
The difference is that mining is much more centralized and expensive than it was in 2016. During the previous two halvings, miners were some of the strongest Bitcoin believers, while today, they act like some of the strongest skeptics. Bitcoin miners today have extremely specific scenarios in which they purchase new equipment or turn on their old rigs – simply put, the price has to make sense in light of the electricity cost. Bitcoin miners today are not speculators, they have a clear cut list of expenses and a bottom line they need to hit. Back during the 2012 halving where Bitcoin was worth about $12 (the reduction in daily selling pressure for this halving was about $43,200), you could mine on your laptop, but you likely would hold on to your block rewards instead of immediately selling them.
This time it’s different – we’ve never seen such a huge and consistent drop of daily selling pressure. This will almost certainly lead to a price surge.
Coronavirus Economic Backdrop is Exactly what Bitcoin was Built For
A trillion here, a trillion there. We’re devaluing fiat currencies around the globe faster than you can say ‘hyperinflation’ and buyers are having legitimate issues purchasing gold. People honestly don’t even want to hand each other cash anymore cause the bills are likely laden with Covid-19 droplets.
In the United States alone, trillions of dollars have been created in stimulus efforts to mitigate the looming economic threat which decisively ended wall street’s longest bull run in history. Germany is boasting unlimited cash and the European Central Bank isn’t backing away from this fight either, as Christine Lagarde pledges a 750 billion euro commitment. All of this money being created devalues the rest of it in circulation, bringing to light Bitcoin’s provable scarcity principle.
The general population currently doesn’t understand why creating money at this pace is alarming economists, but when the signs of inflation start to show, wall street and main street will be seeking alternative ways to store their wealth.
Furthermore, Bitcoin is sitting dry powder – One major factor that moves the price of Bitcoin upwards is the price of Bitcoin moving upwards. The bull market that saw Bitcoin reach $20K in 2017 happened quickly, and it was mostly driven by FOMO. Once we cross $20K again it’s going to be a quick ride up with clear skies ahead. The current economic backdrop is exactly the spark that Bitcoin needs to explode.
Bitcoin just Got a Taste of the Worst Case Scenario
Years from now when talking about Bitcoin it will be hard not to mention the historic Coronavirus sell off (or Black Thursday) and the halving in the same breath as they are happening within a couple months of each other.
Bitcoin did well in dealing with the Coronavirus sell off which saw the price tumble 52% and more on some exchanges, leading to a historically significant difficulty adjustment. There has been an immediate and consistent uptrend since the crash and at this point the price and key metrics have all recovered very nicely. The hashrate is continuing to challenge the all time high and transactions are showing a consistent and strong upwards trend to previous levels.
In as few words as possible, the state of the network is strong.
Some nightmare scenarios that bears are considering are a decrease in security due to miner capitulation post halving and a large sell off by weak hands causing the price to tumble below the $3K super support. The truth is that there are only strong hands left after the massive sell off sparked by the Coronavirus, anyone with Bitcoin after March 12th, 2020 is likely not selling it, even if it goes down to zero. The bottom is in.
People out here talking about “final capitulation” while we almost went to zero due to cascading liquidations overnight.— DonAlt (@CryptoDonAlt) March 13, 2020
If there ever was a final capitulation yesterday was it.
The ballsy fuckers that didn’t sell yesterday aren’t gonna capitulate, they’ll go down with the ship.
As for the miner capitulation, this will certainly happen as the block rewards get halved, and only the more efficient operations will continue to exist. However, this won’t lead to a decrease in security as the new generation of mining hardware is simply much more powerful, and it’s being purchased faster than companies can produce it.
The Antminer S17, for instance, has a hashrate of 53Th/s which is approximately half as fast as the Antminer S19 (scheduled for delivery last this month.) Every iteration of these rigs prove more powerful and they add a significant benefit to the hashrate, they also require less electricity (so they can be ran in more places) and for the most part run a bit more quiet than their predecessors.
One great side effect of this is mining moving away from China which is mostly full of old generation mining rigs that will certainly have to shut off after the halving as they will become unprofitable to run. Even power plants are starting to mine Bitcoin and other operations that have surplus electricity are starting to get involved – this will ensure that there will always be enough hashrate to secure the network from bad actors.