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Industry Investor: Bitcoin Halving May Not Push Prices Higher

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In less than six months’ time, Bitcoin will see an extremely important event. Known as a “halving” or “halvening,” the number of coins issued per block to miners will get cut in half, effectively meaning that Bitcoin’s inflation rate will be cut in half in layman’s terms.

What’s interesting is that this mechanism was never mentioned in Satoshi Nakamoto’s seminal whitepaper on Bitcoin, though this part of the cryptocurrency has become an integral part of the network.

Bitcoin Education

You see, the halving mechanism, should it be kept in the code in the decades to come, will ensure that there will only be 21 million coins in existence. Ever. This ties into Satoshi’s seeming obsession with creating a scarce, hard form of money that is unlike fiat money, which can be printed without limits.

Despite the fact that it was a non-mention in the whitepaper and that it may seem like a trivial facet of Bitcoin, analysts have long believed that the halving has a strong positive effect on the cryptocurrency market. Not everyone is convinced though.

In fact, a top cryptocurrency investor who has made investments in some of the space’s biggest companies recently came out against the bullish narrative around the halving.

Bitcoin Halving to Be a Non-Event?

Jason Williams, co-founder at digital asset fund Morgan Creek Digital, said at the turn of the month that one of his unpopular opinions is that “Bitcoin halving in May 2020 won’t do anything to the price. It will be a non-event.” This assertion comes in the wake of a strong downturn in the cryptocurrency markets, which has thrown cold water on a lot of the bullish sentiment and narratives being pushed earlier this year.

It isn’t only the Morgan Creek Digital partner that is showing skepticism towards Bitcoin’s halving. Per previous reports from Blockonomi, co-founder of Bitmain Jihan Wu said that he believes that a Bitcoin bull run may not follow the halving next year.

Data from Strix Levithan, a Seattle-based cryptocurrency startup, corroborated this. They reported earlier this year that analysis of data on 32 halvings across 24 crypto assets, which includes Bitcoin and Litecoin, suggested that there is no clear evidence that crypto assets that see their emission halve “outperform the broader market in the months leading up to and following a reduction in miner rewards.”

Others Beg to Differ

What’s interesting is that Williams’ partner, Anthony Pompliano, is a staunch believer that the halving will push Bitcoin much higher than current prices. Pompliano, who has become one of Bitcoin’s loudest cheerleaders, posted this tweet below in August, in which he implied that Bitcoin’s halvings will be an event that allows the cryptocurrency to gain more traction than ever before.

Pompliano isn’t alone in this positive sentiment. Just the other day, Thomas Lee of Fundstrat Global Advisors cited the reduction in miner rewards as a catalyst that is likely to provide Bitcoin with some jet fuel heading into and out of 2020.

Can’t Argue With the Math

So sure, the debate around the effects the halving will have on Bitcoin’s price seems divided, though it seems that math is on the side of bulls. PlanB, an institutional quantitative analyst interested in Bitcoin, found earlier this year that the market capitalization of BTC can be accurately determined by the stock-to-flow ratio (effectively inflation) of the cryptocurrency.

His model, which is cointegrated to Bitcoin’s price history and fits the BTC price to an R squared of 0.947 (extremely accurate in statistics lingo), suggests that the cryptocurrency’s market capitalization will have a fair valuation of $1 trillion after the halving.



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I am a writer who has been following the cryptocurrency space since 2013. My insights and interviews have been featured in leading publications in the industry such as LongHash, NewsBTC, and Decrypt. When I am not writing, I work as a team member of the EXODUS division of HTC, a Taiwanese electronics company. I own a small amount of Bitcoin. Contact NickC@blockonomi.com

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