Crypto investors and hodlers alike are sitting on the edge of their seats, waiting to see what unfolds with the highly anticipated bitcoin halving event that is scheduled to take place mid-May.
Since bitcoin’s inception in 2009, the halving (also known as halvening), is an event that takes place roughly every 4 years. During the halving, block rewards are cut in half, which in turn, limits the supply of bitcoins.
Michael Dubrovsky, cofounder of the mining company PoWx puts sheds light as to how the bitcoin halving impacts price, “The theory is that there will be less bitcoin available to buy if miners have less to sell.” So, from a supply-demand perspective:
- If bitcoin supply decreases and the demand for bitcoin stays the same, then the price of bitcoin will increase.
- If bitcoin supply decreases and the demand for bitcoin increases (ie. Institutional investors, millennials, or boomers, etc. looking to capitalize on the hype increases), then the price of bitcoin will see a significant increase in price.
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Bitcoin halving historical performance
To date, there have only been 2 bitcoin halvings. From a historical perspective, during previous bitcoin halvings, each time the price of bitcoin has reached all-time new highs:
- On November 28th, 2012, the first bitcoin halving occurred, which saw the price of bitcoin increase from $11 to $1,000 around a year later.
- During July 2016, the second halving took place and the price of bitcoin was trading at around $700, and in 2017, the price skyrocketed to $20,000.
The third bitcoin halving, which is scheduled to take place in May 2020 has seen some lofty predictions on bitcoin prices. Billionaire bitcoin bull Tim Draper believes that the price of one bitcoin could rise to $250,000; Buffett’s Books founder Preston Pysh thinks that bitcoin could skyrocket to $300,000 after the halving; former Goldman Sachs GS hedge fund manager Raoul Pal predicts that the price of bitcoin to hit $1,000,000 within 3 years; and Silk Road founder Ross Ulbricht predicted that it could hit an astronomical price of $333,000,000 per bitcoin.
More bitcoin millionaires may materialize
During the previous 2 bitcoin halvings, countless millionaires were created. J.R. Forsyth, the founder of Onfo was one of them. He was studying mathematics as an undergraduate and was exposed to bitcoin and digital ledger technology.
Forsyth says, “It became obvious to me that math-based currencies (like bitcoin) would eventually supplant sovereign notes. I mined bitcoin and litecoin very early on and held onto them. The massive appreciation of those assets allowed me to invest in other cryptocurrency technology which ultimately led to the development of Onfo, a platform that helps people earn money through network mining.”
Or take Alan Glanse, charity founder and CEO of the cannabis business JuicyFields for instance. During his Wall Street days, he bought 100 bitcoins from a colleague that urgently needed money in 2012. Then, he forgot about his bitcoin. It wasn’t until the parabolic price highs of 2017’s second bitcoin halving, that he realized that he had become an instant millionaire.
Glanse believes that the stimulus package will only strengthen the US economy and substantial market growth can be witnessed 2-3 months after the bitcoin halving event.
The Federal Reserve
The Fed’s balance sheet is expected to exceed $6.5 trillion this year, with never seen before levels of money printing. In retrospect, that represents an increase of more than $2 trillion in under 6 weeks.
Todd Crossland, CEO of CoinZoom says that “While I applaud and support the government in taking the most aggressive measures in providing stimulus for the economy, just the magnitude of the stimulus and printing of dollars, and the accompanying debt gives me a reason to pause. The stimulus will come with inflation and subsequently pressure on the value of the dollar. In my opinion, this paints another bull case for bitcoin and digital assets.”
Right now, the world is undergoing a major financial shift. During the black swan stock market crash of March 2020, investors dropped stocks for cash, resulting in a liquidity crunch. The price of bitcoin and other digital crypto assets took a temporary nosedive. Since then, bitcoin has fully recovered, along with most other crypto assets. That said, if the Fed’s stimulus plan results in deflation, then followed shortly after by hyperinflation, this could paint a very bullish scenario for bitcoin.
A massive shift in wealth
Billionaire investor and founder of Bridgewater Associates, Ray Dalio, believes that in the near future, there could be a massive shift of wealth. Many in the crypto community have taken this to imply that cryptocurrencies like bitcoin are the solution to which Dalio speaks of. If that’s the case, then a new class of millionaires may emerge from the severe crisis that is gripping the world’s economy.
Dalio says, “Governments that have the power to do so are printing money to help ease the debt burdens and help finance the expenses that are denominated in their own currencies, which will weaken their own currencies and raise their levels of monetary inflation to offset the deflation that is coming from reduced demand and forced asset sales that are happening as those that are stretched have to raise cash.”
Dalio is a firm believer that wealth cannot simply be created by producing more money and credit and that the long-term debt cycle is coming to its end. Dalio suspects that a restructuring of the monetary system is imminent. With countries like Venezuela, Lebanon, and the Bahamas exchanging local currencies for bitcoin, then Dalio may indeed be correct. If that is the case, then the third bitcoin halving could be a major catalyst for monetary change, resulting in a generation of new crypto millionaires.