The goal of this post is to explain what the halving is and how it is impacting the price of Bitcoin. But also look at what some analyses of Bitcoin's future price say about the newer future. If this sounds like something you would like to learn more then this is the post for you. =)
What is the halving?
The halving is the name given to the predetermined event when the block rewards are cut in half. That sounds a bit convoluted, so let me try and explain it in an easier-to-understand way, hopefully at least. First of all, you have the miners, they are competing to be the ones to be able to add the next block to the Bitcoin Blockchain. They do this because if you are the one who gets to add the next block, you will be rewarded with a set amount of Bitcoin. At the start, this reward was a massive 50 Bitcoin. Well massive with today's price at least. Back then The price of Bitcoin was nowhere close to today's price.
Not all halving event is as epic
After 210,000 blocks are added to the Blockchain the rewards are halved. And it is this event that has become known as "The Halving". Pretty fitting, right? We have already had a number of halving, and because of that, the reward that started of at 50 Bitcoins per block is now down to 6.25 Bitcoins per block. That makes it three halving events, and we are approaching the fourth one.
This don't really explain why everyone seems to be so "excited" about the halving, nor why it apparently is affecting the price of Bitcoin so much.
How the Halving impacts Bitcoins price
There is really only one cost associated with Bitcoin, the cost to mint. This is the cost a miner has in order to acquire 1 Bitcoin. In general, this is considered to be mostly made up of electricity costs. This is because that is the fuel, if you will, you need to feed the ASIC to have them working. This is because you will, in an ideal case at least, have a return on investment on the cost to buy the ASIC. But when it comes to the power cost. it will always be there.
With the cost to mint being the same, this means that the halving will double the cost. This is because you now get half the amount of Bitcoin in payment or reward for adding a block to the blockchain. This in turn will impact the price of Bitcoin in two ways. The first is due to the cost increase. This means that no miner would want to sell any mined Bitcoin below this new cost. Simply because doing so would mean they would lose money.
The second way it will impact the price is because the lower reward amount will over time decrease the amount of Bitcoin that will be available to be bought. And if the demand is consistent, this will then drive up the price further.
These two, the cost to mint and the demand, will determine the new "low" price. Of course, there can be things that can put the price lower than these two factors would indicate it should be. One such thing can be the fact that the electricity price is very different around the world. This in turn impacts the cost to mint in a huge way.
The Bitcoin Bull loves FOMO
There is also a third thing that impacts the price. To some extent, it might be the factor that impacts the price the most. I am talking about FOMO, or the Fear Of Missing Out. And it impacts Bitcoin to a great deal during the bull run. As Bitcoin approached the halving what so far has happened is that the price slowly increases to the new low price. And continues to increase after the halving. This then causes the media to report that Bitcoin price is increasing. This in turn causes FOMO among the people who typically are not normally into crypto. This normally occurs 6-12 months after the halving has occurred. And this in turn is what historically has led to a very inflated price, aka a new high. And why it normally come back down fairly fast.
What say the "experts"?
I have looked at two different Bitcoin analyses made by traders, Titan of Crypto put the pre-halving targetzone for Bitcoin between $39.000 and $50.000. The second trading analysis made by Crypto Crew University put the upper target at $48.000. I can't remember the bottom tho, and I was unable to find the particular video where the bottom was discussed. But it was most likely slightly lower than the previously mentioned $39.000.
Now that we have taken a look at what the traders think the price targets will be. Let us take a look at what some analyses have put the cost at post-halving. Earlier this year, in September, Glasnode put out an analysis where they had the current cost to min sitting at $15.000 and talking about the post-halving cost then being at least $30.000. They were also adding a warning that miners would be running into severe problems if the price of Bitcoin were to stay, or linger, at below $30.000.
In a post from July on Coindesk, they mention analyses that showed that the cost to mint post halving could possibly reach $40.000. I assume this analysis was looking a bit further into the future and not just the time after the halving. A third analysis was made by Son of a Tech, where he talks about the price point he is expecting to see post-halving. He has that targeted at the range of $45 to $50.000.
If we now then converge these two types of analyses we see that there is an overlap between them. I would therefore say the most likely range for Bitcoin leading up to and just after the halving is a range between $40.000 and $50.000. I do not think it is very likely we will see the lower ~$30.000 come into play. Mostly due to the fact that we seem to be rather comfortably sitting above it already. That coupled with the expectation of the halving, I do not think any miner willingly would part with Bitcoin at that price unless they are under very financial strains. Historically Bitcoin has also had a rally in price leading up to the halving, this rally has been between 61.8%–78.6%. This means that a drop, while not impossible, is fairly improbable.
In short, I think we will see the price of Bitcoin keep climbing until it is in the target zone. And depending on how fast we get over the $40.000 mark, I would expect more or less turbulence. The faster we get there the more turbulent I think we will see. And then as the media coverage of Bitcoin price increases more FOMO money will be put into Bitcoin. In the end, triggering the next bull run around October of the next year.
What do you think about my take on the future of Bitcoin, do you agree with my analyses or have I made any mistakes or omitted anything crucial? Please share your thoughts on this in the comment section below. I am looking forward to hearing your thoughts.
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