At long last, the Bitcoin (BTC) block reward reduction is a mere one year away, according to recent calculations anyway. And Litecoin’s issuance shift, which many call a “halving” or “halvening”, in 70 days away. With this news, coupled with BTC’s recent move to $8,000 and an array of positive news, analysts have begun to express some decidedly bullish sentiment.
Bitcoin Halving One Year Away
As recently noted by anyone and everyone on Twitter, Bitcoin’s third halving is in approximately 365 days. This, for those unaware, means that the number of BTC issued per each block, mined every ten minutes, will fall from 12.5 BTC to 6.25 BTC. This marks a 50% reduction, hence “halving”. So by May 2020, the number of BTC issued each and every day will fall from 1,800 to 900, and may potentially spark yet another jaw-dropping rally.
Last time this event occurred, there were parties across the industry, held when the halving occurred. But more importantly, what followed was a massive rally, during which Bitcoin moved to new heights and went parabolic.
Binance, Jordan Tuwiner, Dennis Parker, PlanB, among many other key firms and influencers/analysts in the space have since come out to remind their followers that this event is one year out.
As Tuur Demeester, a partner at Adamant Capital, notes that the halving has always been an integral part of Bitcoin’s four-year price cycles. Seen in the chart below is Bitcoin’s five cycles of bull market, bear market, accumulation, expansion, and reaccumulation. What’s noticeable is that the halving has always initiated the bull market phase, which is preceded by a period of reaccumulation, which Bitcoin is poised to enter in the coming two months.
But to what price will Bitcoin bring the halving to? A leading analyst claims that the auspicious event, slated to occur in May 2020, will eventually bring BTC over $50,000, citing a scarcity valuation model.
Industry researcher PlanB recently shared his thoughts on 2020’s halving in an extensive Medium post. PlanB explains that it would be fair to model Bitcoin’s future valuation through the stock-to-flow ratio (SF), which looks at assets’ above-ground stock and their inflation (flow), especially due to the asset’s Proof of Work (PoW) model.
As it stands, BTC currently has an SF of 25, meaning that it would take 25 years of current issuance levels to produce the current stock (17.5 million BTC). This is similar to silver’s SF of 22, but far under gold’s 62.
With these sums in mind, PlanB goes on to remark that there is a “nice linear relationship” between SF and the market valuation of an asset. Thus, with the halving, which will increase the SF ratio, the analyst predicts that Bitcoin’s market capitalization could reach as high as $1 trillion, which would place BTC at around $55,000 apiece.
While $55,000 for each BTC seems irrational for most, PlanB writes that money from silver, gold, negative interest rate economies, authoritarian and capital control-rife states, billionaires looking for a quantitative easing hedge, and institutional investors will eventually flood into this space.
Title Image Courtesy of Icons8 Team Via Unsplash
