Bitcoin’s halving is just around the corner. It is estimated to take place on May 12th, 2020, and it will slash the reward miners get from 12.5 BTC to 6.25 BTC. Currently, the network produces 1,800 BTC every day, and this is about to be reduced to 900 BTC.
Needless to say, the Bitcoin halving is an important event for Bitcoin and the entire cryptocurrency community. Historically, the price has increased substantially following the past two halvings. Of course, it’s yet to be seen if the event will catalyze any serious bullish momentum, but basic economic principles dictate that if the supply for an asset is reduced while the demand for it increases or remains the same, its price should go up.
Is Bitcoin Halving Already Priced In?
In legacy markets, traders oftentimes use information and facts that are likely to take place in the future to get ahead of the market. For instance, when trading oil derivatives, institutions look at a variety of price-impacting conditions such as weather forecasts, production expectancies, and whatnot, to make their decisions.
BTC/USD 5y chart. Source: TradingView
Hence, arguments have been made that the Bitcoin halving has already been priced. There are experts, though, who oppose this stance, arguing that it’s impossible to price it in ahead of time.
Before being able to determine whether or not an event like this can possibly be priced in, however, it’s important to be aware of how the cryptocurrency works, at least on a basic level — Bitcoin for beginners, if you will.
One such expert, who explains why the halving can’t possibly be priced in, is the popular cryptocurrency commentator, Morgan Creek Capital’s Anthony ‘Pomp’ Pompliano.
Pompliano tweeted -
Regardless, a lot of traders are banking on this event as the price skyrocketed both times it took place in the past. But things were quite different back then compared to where the cryptocurrency market stands today.
The Cryptocurrency Landscape Is Immensely Different
The previous halving took place in 2016, and it propelled the most parabolic movement in Bitcoin’s price in the year to follow. In December 2017, Bitcoin reached its current all-time high value of around $20,000.
Propelled by many traditional mainstream media outlets such as CNBC, Bloomberg, and others, Bitcoin made tons of headlines and got in front of the eyes of many retail investors who piled on.
Today, however, Bitcoin is already an established product. A lot more people are aware of it and of the other cryptocurrencies. More importantly, they are aware of how quickly their price can go up and, of course, go down.
The notion that the supply of freshly minted bitcoins to the market will decrease in half appears very attractive to many. And should the price start to increase notably in the months after the halving, people will have a lot more options to get in on the action compared to last time.
An Abundance Of Buying Options
In 2017, people had relatively limited means of purchasing Bitcoin, let alone derivatives such as futures or options.
Now, however, things are different. There’s an abundance of cryptocurrency exchanges that comply with existing Know-Your-Customer (KYC) and Anti-Money Laundering (AML) regulations which allow purchasing bitcoin with credit or debit cards. Binance is one such example. The world’s leading cryptocurrency exchange has established itself as a trusted solution for those who want to enter the market.
Moreover, there are plenty of derivatives exchanges, Binance Futures included. But it’s far from the only one. Major players such as Huobi and OKEx also have their derivatives counterparts, and it’s not just BitMEX that users can rely on.
All of this leads to one logical conclusion — if Bitcoin’s price is to begin increasing like back in 2017, retail investors will have a lot easier times getting in on the action, and it’s not out of the question for this to catapult the price even higher. But that’s not all.
Institutions Also Have a Way In
In 2017 there were little to no solutions for institutional investors besides over-the-counter trading and self-custody.
Now, the market has players such as the Chicago Mercantile Exchange offering futures contracts for institutions. There’s also Bakkt — the Bitcoin Futures trading platform owned by the owner of the New York Stock Exchange — the Intercontinental Exchange (ICE). Bakkt announced its Institutional Custody solutions regulated and authorized by the New York Department of Financial Services (NYDFS).
Who Stands To Win The Most?
Should history repeat itself, investors in Bitcoin are likely to make a lot of money. However, they are unlikely to come out as the biggest winners.
Those who stand to win the most are the companies offering various Bitcoin solutions. Exchanges, custodians, brokers, and everyone creating bitcoin-centric infrastructure is likely to come out as a huge winner if Bitcoin’s halving indeed catalyzes a huge bull run.
Of course, it’s important to note that the economic environment is also particularly different from that back in 2017. The whole world is currently going through major financial challenges because of the spread of the novel coronavirus and the consequences that it brought. Economies are virtually shut down across the world as governments institute lockdowns to try and limit the spread.
This triggered a sequence of events on Wall Street as the S&P 500 saw decreases charted decades ago.
While many argue that this is the perfect economic setting for Bitcoin, it’s important to remain realistic. It’s still a young and risky asset that the majority of investors are uncomfortable with.
Even though it opposes a lot of the flawed mechanisms of existing fiat currencies, a lot of time needs to pass if bitcoin is to even be considered as a viable alternative.