Volatile as ever, Bitcoin (BTC) has topped $7,000 three times in three weeks. The coin has bounced back 75% since its sell-off last month and is trading at $6,822 at the time of this writing. There's obviously good reason why the cryptocurrency market is increasing in value as other global markets are in free fall.
Bitcoin halving: most anticipated event in bitcoin's history
There's a finite number of 21 million bitcoins, but there's only 18 million in circulation. The remaining 3 million bitcoin will be added into circulation as they're mined.
Bitcoin is mined and added into circulation every ten minutes through the process of mining. Miners earn bitcoin by verifying bitcoin transactions and movements on the blockchain using specialized ASIC computers equipment. Essentially miners are accepting bitcoins as payment for their transaction services.
When miners verify transactions they are mining what is called blocks (hence blockchain). Right now the reward for mining one block is 12.5 bitcoins, which occurs every ten minutes. After the halving in May the reward will be 6.25 bitcoins per block mined.
When bitcoin was created in 2009 the reward for mining one block was 50 bitcoins. Every 210,000 blocks (approximately every four years) the reward for bitcoin is halved. May's halving will be the coin's third halving in almost twelve years since its conception.
2009- 50 BTC per block
2012- 25 BTC per block
2016- 12.5 BTC per block
2020- 6.25 BTC per block
Bitcoin was programmed to halve every 210,000 blocks to control inflation. It also gives an incentive for miners to constantly be working the blockchain and verifying transactions.
So what's the hype?
Money. Wealth. Riches.
Anyone who's heard of bitcoin or cryptocurrencies knows there's a lot of volatility and price swings. In the past three weeks bitcoin's price increased 75% giving financial movers an opportunity to increase their portfolio.
Because of the upcoming halving event, less bitcoin will instantly stop entering the market, which in theory, will drive demand and price.
Price increase after first halving
First halving 11/28/2012 @ $12 per coin. Source: TradingView
Bitcoin's price significantly increased after its first halving. The first halving happened on 11/28/2012, which cut block rewards for miners from 50 BTC to 25 BTC per block mined. Although not immediate, the price of bitcoin dramatically increased by $1,000 in one year's time.
11/28/2012- $12 per BTC
11/28/2013- $1,012 per BTC
In exactly one year after the first bitcoin halving the price increased by 8,333%.
Price increase after second halving
Second halving 07/09/2016 @ $662 per coin. Source: TradingView
Bitcoin's second halving proved to follow the same suit as the first. The second halving happened on 07/09/2016, which cut block rewards from 25 BTC to 12.5 BTC per block mined. Similarly the price increase wasn't immediate, but in a year's time the price skyrocketed.
07/09/2016- $662 per BTC
07/09/2017- $2,671 per BTC
12/17/2017- $19,635 per BTC
In exactly one year after the second bitcoin halving the price increased by 303%. After a year and five months, the price increased 2,866%.
What will bitcoin's price be after the third halving?
The first halving resulted in a 8,333% increase in price and the second halving yielded a 2,866%.
Bitcoin has undoubtedly gained more popularity and investors since both the first and second halving. Expect there to be a dramatic increase after the third halving within one to two year's time.
There is a 65% difference between 8,333% and 2,866%. 65% of 2,866 is 1,863%. Using 1,863%, subtract it from 2,866% and it gives the result of 1,003%. 1,003% is the test number to increase bitcoin by for the third halving we can get our projection for bitcoin's price in 2021; a year or two after the third halving.
Over the past three weeks bitcoin has proven to have solid support at $5,800. Using $5,800 as bitcoins price next month in May, it can be multiplied by 1,003%.
Bitcoin's expected price after the third halving is $63,974.
It's impossible to know where bitcoin's price will after the third halving, but expect it to be dramatically higher than what it is at the time of this writing ($6,822).
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DISCLAIMER: This site article does not contain financial advice. Any and all market analysis is solely the authors opinion.