Year to date, Bitcoin has experienced nearly 212% growth which places it at the best performing asset year to date. We had recently talked about the bull run being fueled by market uncertainties such as rate cuts and China tariffs. With Bitcoin historically being uncorrelated to the stock market, these can all be valid triggers. One area we have forgotten about is Bitcoins “halving” schedule. Some were talking about this a while ago, but it has since been forgotten. With Bitcoin being a fixed supply asset, the halving infrastructure is important and can be another reason for the bull run this year.
What is Bitcoin Halving?
Bitcoin is a fixed supply asset because there will only be 21 million Bitcoin ever mined. So far Bitcoin has mined 17+ million on its ultimate journey to be fully mined. This is extremely different from the traditional financial system, where money is continuously created, which is explained through the term “monetary inflation.” As more money is created, it makes a dollar today worth less in the future. One of the reasons the Bitcoin space has become so intriguing is due to its genetic makeup. Bitcoin is labeled a “store of value” because its a fixed supply asset. Once Bitcoin becomes fully mined, it will then be labeled a “deflationary asset” which is something the financial markets have never really witnessed. Once Bitcoin becomes fully capped at 21 million, it will then be a straight supply vs demand game, which is why people tend to predict massive price growth potential.
To keep Bitcoin inflation in check, Bitcoin halving was a measure put in place. Bitcoin miners are networks of computers that verify data. Whenever a Bitcoin “block” is fully mined, the Bitcoin miners receive a reward in the form of Bitcoin. The reward results in new Bitcoin being released in circulation to reward these miners. So far 17+ million Bitcoin has been released and this number will keep going up until it reaches the 21 million cap. The miner reward gets cut 50% every halving though. With the way the math works out, a Bitcoin halving occurs about every 4 years (when 210,000 blocks have been mined). What happens is the miner reward gets cut in half. Right now a 12.5 BTC reward is released for every block mined. In the year 2020, this reward get slashed to 6.25 BTC, then in 4 more years it will get reduced another 50%. You can start to see how value is generated. Essentially every halving makes Bitcoin more valuable, because miners are working for less with the intent of bitcoin value continuing to rise in the future to compensate for the reward slash.
Bitcoin Halving Chart : Historic Rally Every Year Before The Halving
Bitcoin has now been in existence for 10+ years. With this being said there has been 2 halving period. The first halving was 2012 and the second halving was 2016. As mentioned above, with Bitcoin halving every 4 years, the next halving is scheduled for 2020 (next year). If we take a look at historical price movement, we will quickly see that Bitcoin rallied each year BEFORE the halving…
November 2011 ( 1 year before the initial halving ) = +368% gain
July 2015 ( 1 year before the second halving ) = +135%
May 2019 ( 1 year before the third halving ) = ??
In May of this year Bitcoin was valued at about $8,247. So far history is repeating itself as Bitcoin has continued the uptrend since May, recently surpassing $11,500 levels. Despite Bitcoin being up 200+ percent year to date, many would argue there is still room for growth. If we took a simple average of 368% and 135% that would mean a 250% gain from Mays price of $8,247. If that played out perfectly, that would mean Bitcoin could be in the $25,000+ region by the end of 2019. With Bitcoins volatility you have seen many people target 20K by end of the year. Obviously this would be a more conservative figure which can be justified based on Bitcoins volatility and other factors. Bitcoin is a rollercoaster and obviously anything can happen. So far Bitcoin has followed protocol by witnessing a substantial rally the year before another halving.