Bitcoin halving effect and its economic analysis
Recently, bitcoin seems to be in a slump. It has been more than half a month since the cross trade of US $8300, and negative emotions are still spreading. The enthusiastic "return of the bull market" in the middle of the year was described as a false prosperity by the singers, whose purpose is only to attract more leeks into the market.
On October 10, bitcoin ETF was rejected again. Although it didn't cause much negative impact on the market, it undoubtedly added another dark cloud to investors' mind. Everyone is looking forward to the bitcoin production reduction in 2020. Many analysts believe that after halving bitcoin production, it will reach US $90000. So is it really magic to halve bitcoin?
In the bitcoin network, in order to motivate the miners to maintain the security of the network, founder Nakamoto has formulated the rules for the issuance of bitcoin. The issued bitcoin rewards the miners who win the competition with the results of calculation competition. Every 210000 blocks is halved, and the output of each block takes about 10 minutes. The calculation can be halved once every four years.
The first time bitcoin was halved was at the end of 2012, 50 bitcoins were awarded for digging out the 210000 blocks, but only 25 bitcoins were awarded for digging out the 210001 blocks.
The second half reduction took place in mid-2016, and the reward was halved again, so the 420001 block was dug out to reward 12.5 bitcoin.
The next half reduction is around May 19, 2020. By that time point, the block reward will be reduced from 12.5 bitcoin to 6.25 bitcoin directly.
It will continue to halve by 2024, that is to say, there are only 3.125 bitcoins left for each block, which will decrease gradually.
Let's first look at what happened in the half cycle of bitcoin history.
Half for the first time
Time: November 28, 2012
Price increase: 350-400 times (4 times before halving, nearly 100 times after halving)
Rising cycle: 24 months (12 months before and 12 months after halving)
Before the start of the first half price cycle, bitcoin experienced a cycle from June to November 2011, with its price dropping from $31 to $2, down more than 90%.
Bitcoin prices began to rise in November 2011, then halved for the first time in November 2012, and then continued to rise until a record high of $1200 in November 2013. In this cycle, bitcoin prices show a sharp rise after the halving (they rose to $13 before the halving and to $1200 after the halving). The overall price increase in this cycle is 350-400 times.
In fact, bitcoin only quadrupled before the halving, and nearly 100 times after the halving.
After peaking at $1200, a 14 month deep recession followed, with bitcoin prices falling more than 80% to a minimum of $200. In the next 10 months, bitcoin prices remained between $200 and $300.
Half for the second time
Time: July 9, 2016
Price increase: 80-90 times (3 times before halving, nearly 30 times after halving)
Rise cycle: 25 months (9 months before half reduction, 16 months after half reduction)
Bitcoin prices began to rise sharply in November 2015, which opened a second half price cycle, about eight months ahead of the official half price cut in July 2016.
After the halving officially took place, bitcoin continued to rise for about 24 months, as before, until it reached a record high of $19000 in December 2017.
In fact, in this half price cycle, most of bitcoin's appreciation also happened after half price reduction (it rose to $650 before half price reduction, and rose to $19000 in parabola shape after half price reduction). The increase of the whole cycle is about 80-90 times, but only about 3 times before the halving.
After the half price reduction cycle, bitcoin experienced a 12-month recession. Its price fell by more than 80% again, reaching a minimum of about $3000. In the next four months, bitcoin has been hovering between $3000 and $4000.
Half for the third time
Time: around May 18, 2020
Price increase: unknown
Rising cycle: unknown
In April 2019, bitcoin started to rise, reaching a peak of nearly $14000, 3-4 times higher than the starting point. Based on past experience, we can believe that bitcoin has entered a half cycle.
Imbalance of supply and demand
According to the theory of price supply and demand, the supply of bitcoin is dynamic, that is, 12.5 bitcoins per 10 minutes. From the perspective of demand, a large number of institutions entered the market at the beginning of this year, and began to lay out bitcoin futures, all of which increased the user demand of bitcoin.
From the perspective of supply, in May 2020, the halving will break the dynamic balance of bitcoin output, from 12.5 bitcoins per 10 minutes to 6.25. The supply will halve, while the demand will increase. The overall market is bullish.
Increase in miners' costs
Who is the most sensitive to halving bitcoin production? Nature is the guardian of bitcoin blockchain - miner.
If the output is halved, in a narrow sense, the mining cost will double, that is to say, the cost of miners will not change, but the output is only half. When miners lose money, they only take two actions. The first is to hoard money and wait for the price of money to be higher than the cost line. The second is to shut down the machine and not dig. This will lead to the adjustment of computing power and then to dynamically balance the price of money.
At present, miners have a very strong voice in bitcoin ecology, so it can be said that halving will lead to the rise of the currency price.
Investor expectations
Whether it's traditional financial products or digital currencies, all investors are buying their expectations because of favorable future, undervalued current value and other factors. All the reasons for buying are because they are optimistic about the future. There is still one year left before the current half reduction. The half reduction of bitcoin in the currency circle has a strong subjective consciousness, which is a consensus of the public._DJMINER
On October 10, bitcoin ETF was rejected again. Although it didn't cause much negative impact on the market, it undoubtedly added another dark cloud to investors' mind. Everyone is looking forward to the bitcoin production reduction in 2020. Many analysts believe that after halving bitcoin production, it will reach US $90000. So is it really magic to halve bitcoin?
What is bitcoin halved
The first time bitcoin was halved was at the end of 2012, 50 bitcoins were awarded for digging out the 210000 blocks, but only 25 bitcoins were awarded for digging out the 210001 blocks.
The second half reduction took place in mid-2016, and the reward was halved again, so the 420001 block was dug out to reward 12.5 bitcoin.
The next half reduction is around May 19, 2020. By that time point, the block reward will be reduced from 12.5 bitcoin to 6.25 bitcoin directly.
It will continue to halve by 2024, that is to say, there are only 3.125 bitcoins left for each block, which will decrease gradually.
The impact of bitcoin halving on price
Let's first look at what happened in the half cycle of bitcoin history.
Half for the first time
Time: November 28, 2012
Price increase: 350-400 times (4 times before halving, nearly 100 times after halving)
Rising cycle: 24 months (12 months before and 12 months after halving)
Before the start of the first half price cycle, bitcoin experienced a cycle from June to November 2011, with its price dropping from $31 to $2, down more than 90%.
Bitcoin prices began to rise in November 2011, then halved for the first time in November 2012, and then continued to rise until a record high of $1200 in November 2013. In this cycle, bitcoin prices show a sharp rise after the halving (they rose to $13 before the halving and to $1200 after the halving). The overall price increase in this cycle is 350-400 times.
In fact, bitcoin only quadrupled before the halving, and nearly 100 times after the halving.
After peaking at $1200, a 14 month deep recession followed, with bitcoin prices falling more than 80% to a minimum of $200. In the next 10 months, bitcoin prices remained between $200 and $300.
Half for the second time
Time: July 9, 2016
Price increase: 80-90 times (3 times before halving, nearly 30 times after halving)
Rise cycle: 25 months (9 months before half reduction, 16 months after half reduction)
Bitcoin prices began to rise sharply in November 2015, which opened a second half price cycle, about eight months ahead of the official half price cut in July 2016.
After the halving officially took place, bitcoin continued to rise for about 24 months, as before, until it reached a record high of $19000 in December 2017.
In fact, in this half price cycle, most of bitcoin's appreciation also happened after half price reduction (it rose to $650 before half price reduction, and rose to $19000 in parabola shape after half price reduction). The increase of the whole cycle is about 80-90 times, but only about 3 times before the halving.
After the half price reduction cycle, bitcoin experienced a 12-month recession. Its price fell by more than 80% again, reaching a minimum of about $3000. In the next four months, bitcoin has been hovering between $3000 and $4000.
Half for the third time
Time: around May 18, 2020
Price increase: unknown
Rising cycle: unknown
In April 2019, bitcoin started to rise, reaching a peak of nearly $14000, 3-4 times higher than the starting point. Based on past experience, we can believe that bitcoin has entered a half cycle.
Economic analysis of the halving effect of bitcoin
Imbalance of supply and demand
According to the theory of price supply and demand, the supply of bitcoin is dynamic, that is, 12.5 bitcoins per 10 minutes. From the perspective of demand, a large number of institutions entered the market at the beginning of this year, and began to lay out bitcoin futures, all of which increased the user demand of bitcoin.
From the perspective of supply, in May 2020, the halving will break the dynamic balance of bitcoin output, from 12.5 bitcoins per 10 minutes to 6.25. The supply will halve, while the demand will increase. The overall market is bullish.
Increase in miners' costs
Who is the most sensitive to halving bitcoin production? Nature is the guardian of bitcoin blockchain - miner.
If the output is halved, in a narrow sense, the mining cost will double, that is to say, the cost of miners will not change, but the output is only half. When miners lose money, they only take two actions. The first is to hoard money and wait for the price of money to be higher than the cost line. The second is to shut down the machine and not dig. This will lead to the adjustment of computing power and then to dynamically balance the price of money.
At present, miners have a very strong voice in bitcoin ecology, so it can be said that halving will lead to the rise of the currency price.
Investor expectations
Whether it's traditional financial products or digital currencies, all investors are buying their expectations because of favorable future, undervalued current value and other factors. All the reasons for buying are because they are optimistic about the future. There is still one year left before the current half reduction. The half reduction of bitcoin in the currency circle has a strong subjective consciousness, which is a consensus of the public._DJMINER
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