4 Reasons Why the 2020 Bitcoin Halving is Different
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4 Reasons Why the 2020 Bitcoin Halving is Different faast Follow May 6 · 7 min read

The next bitcoin Halving is almost here, and there is much speculation that it could lead to never-before-seen highs in the price of BTC. In this article we’ll examine what happened after the previous Halvings, and 4 reasons why the 2020 bitcoin Halving could be different. Could we see BTC at $100,000 or higher? Read on to learn more.

The Bitcoin Halving: A Brief Refresher

If you’re not 100% clear on what a Halving is, this will help you understand why it’s so important.

Bitcoin works in a fundamentally different way than fiat currencies like the US Dollar, the Euro or the Japanese Yen. Unlike fiat currencies which are printed at will by central banks, the supply and creation of BTC is subject to algorithmic limitations. These limitations dictate that there will only ever be a maximum supply of 21 million bitcoins. This makes bitcoin deflationary, rather than inflationary.

New bitcoins are added to the circulating supply every 10 minutes. This happens when a “block” of transactions is added to the BTC blockchain. These transactions are validated by miners who run specialized hardware that requires a lot of computing power and is expensive to operate. In order to incentivize the miners to do this, the newly created bitcoins are distributed to miners every 10 minutes, something known as the “block reward”.

However every 210,000 blocks (roughly every 4 years) something special happens: the amount of newly generated bitcoins that miners earn is cut in half. This is called a “Halving”.

The current block reward is 12.5 BTC, which means somebody, somewhere, is earning that much BTC every 10 minutes. But on May 11th of 2020, that will change. On that day, the block reward will be cut in half to 6.25 BTC.

How Past BTC Halvings Affected the Price of Bitcoin

There have been two previous Halvings since BTC launched in 2009. On November 28, 2012, the block reward was cut in half from 50 to 25 BTC. The 2nd Halving occurred on July 9, 2016, when the block reward was reduced to its current level.

The reason why this is so important- and why there is so much media coverage about it- is that Halvings can have a dramatic effect on the price of BTC. In each of the previous two instances, the price of BTC surged to all time highs that would have seemed unthinkable beforehand. However, these price increases don’t occur right away…

Let’s examine both previous cases before explaining what could happen with the 2020 bitcoin Halving.

First BTC Halving: In November of 2012, the price of 1 BTC was about $11 US dollars. Immediately after the Halving, nothing really happened. By year’s end, the price had only gone up a few dollars.

But roughly a year later, the price surged to over nearly 8000% with prices as high as $1000–1100.

This was followed by a crash and 80% correction. BTC’s did not fully recover, but even it’s new lows ($220 range) were significantly higher than any pre-Halving price.

2nd BTC Halving: In July 2016, BTC was around $650. It would stay in the $570–700 range for a few months, and then gradually began to climb around year’s end. Throughout 2017 the price grew in spurts until late September, when it exploded from around $3600 to an all time high of $20,000 USD.

Afterwards, there was another 80% correction in 2018, and a prolonged bear market which brings us to the present day. Once again, the new lows during this time where higher than any pre-2016 Havling price.

Image source: Coindesk

The pattern is clear:

A new, all time high for bitcoin is reached approximately 12–18 months after each Halving. In both cases, the new ATH dwarfed anything seen before.

The 2020 Bitcoin Halving is almost upon us. Does that mean that we will see a new all time high for BTC in the late summer/early fall of 2021?

Before we answer that, it’s important to note that no two Halvings are 100% alike. In each case, there were new factors at work, and different things happening in the world that could have been influential.

In the first Halving, no one was really sure what was going to happen. Cryptocurrency at that time was still seen primarily as a an obscure hobby among computer and cryptography enthusiasts, and not a serious investment or form of money. The notorious Mt. Gox hack also did much to damage the appeal of bitcoin for a while.

The 2nd time around, the price had risen to the mid $600s…clearly people had begun to regain confidence in BTC before the 2016 Halving, but there was also something new at work: Ethereum had launched the year before, and it was now possible for projects all over the world to crowd fund through token sales: the ICO gold rush had begun.

BTC seemed to be lifting up all the altcoins which promised a much higher potential ROI. The crypto market’s enormous growth also caught the attention of the mainstream financial media, which began covering it seriously for the first time, and contributed to the hype. BTC was literally the biggest story in the world in late 2017.

The 2018 crash hit a lot of people hard, but a new, permanently higher level of public awareness had been reached, and now big financial institutions were paying attention.

4 Reasons Why the 2020 Bitcoin Halving is Different

Just as in the previous two cases, there are new factors at work that could affect how things unfold after the 3rd bitcoin Halving:

#1: The Coronavirus. The COVID-19 global pandemic has knocked the entire global economy sideways. The stock market has plummeted and millions of people have lost their jobs. This is a once in a century pandemic, which has in turn triggered the worst economic crisis since The Great Depression.

For a while, it seemed like bitcoin was holding up as an effective “safe haven” asset until a sudden crash on March 12th. On what became known as “Black Thursday”, the price of bitcoin plummeted to lows below $4000, despite the fact that nothing about BTC’s fundamentals had changed.

It’s likely this was just panic selling related to the economic woes of COVID-19. BTC has rebounded nicely then, but it’s possible that the pandemic could affect BTC’s price in other ways in the near future.

#2: Central banks firing up the printing presses. In an attempt to alleviate the economic carnage caused by the COVID-19 shutdowns, some governments have begun distributing cash aid directly to their citizens. In order to pay for this, central banks are printing money like it’s going out of style.

There has always been some speculation in the crypto community that BTC could be a safe haven storage of wealth in the event that fiat currencies fail, and this unprecedented peacetime spending has only fueled that debate. It’s possible that this has contributed to the sudden rise of BTC to the $9000 USD range, and could accelerate further growth in the future.

At the same time, some central banks are actively pursuing their own digital versions of fiat currencies which they control, and Facebook is attempting to launch Libra. The 2020 fintech world is very different than the one the previous two Halvings occurred in.

#3: Institutional investors want in on the action. In the previous Halving, financial institutions suddenly realized that cryptocurrencies were becoming too big to ignore. Institutions like Greyscale launched their Bitcoin Trust product (GBTC) which currently accounts for nearly 2% of all BTC in existence.

The Chicago Mercantile Exchange and services like Bakkt (a subsidiary of Intercontinental Exchange, which owns the NYSE) now support the trading of bitcoin futures contracts. And even traditional financial institutions like Fidelity Investments are are now offering crypto custody services.

While the much-anticipated bitcoin ETF remains elusive for now, all of these changes are signs that mainstream financial institutions have become more comfortable with bitcoin, and more institutional money could soon come flooding into BTC.

#4: It is now possible to short bitcoin. While it’s fair to say most people would love to see bitcoin surge to a new all-time high, there are also a smaller number of folks who not only want BTC to plummet, but could make a fat stack of cash if it does. There are now several different ways to short bitcoin on crypto-derivatives trading platforms, as well as some centralized exchanges.

This was not the case during the 2017 bull market or before. It’s quite possible that traders taking large short positions could affect this price in ways HODLers never had to think about during the previous two Halvings.

So what will Happen to the price after the 2020 Bitcoin Halving?

It’s difficult to say for certain what will happen, especially with so many enormous new factors at work. There have been many predictions claiming a price of $100,000 is possible. While others say even $200,0000 to $500,000 is possible. It may seem hard to believe, especially the higher numbers, but in it can’t be ruled out.

The world is a very uncertain place right now, but it is fair to say that history has repeated itself twice already, and it is quite likely we could see a jaw-dropping new all time high in the late summer or early autumn of 2021.

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What’s the best way to prepare for the 2020 Bitcoin Halving?

That’s easy.

Step 1: Store your crypto safely in your own wallet that you control.

Step 2: Connect your wallet to Faast and so you can swap coins, visualize your holdings and manage your portfolio all in once place. Visit the Faast website now to get started in seconds.