As the cryptocurrency market continues to remain under downside pressure with no signs of an imminent decent recovery, all eyes are now on the upcoming bitcoin halving in May 2020. Next year’s halving will not only increase the demand for bitcoin but also reduce the asset’s inflation rate below the target inflation rate set by central banks.
Bitcoin’s Inflation Rate To Reduce To 1.8% After Halving
In May 2020, the bitcoin network is set to undergo halving, which means that block rewards for miners will reduce by half. Presently, around 1800 new bitcoins are minted on a daily basis with miners receiving a reward of 12.5 BTC for every successfully mined block. This is set to reduce to 6.5 BTC next year.
With reduced rewards, miners will either close down their operations or hold their bitcoin stashes until they get a whiff of a break-even price. The result will be increased scarcity for an already scarce asset. Undoubtedly, scarcity is the mother of all demand.
Another effect of the halving that is oft-times overlooked is the reduction of bitcoin’s inflation rate. Presently, the annual rate is close to 3.8%. It will reduce to 1.8% after the third halving, and this is definitely a huge feat in financial history.
Popular analyst @Rhythmtrader noted that this 1.8% rate will not only be lower than Gold’s 2% yearly supply rate increase but also below the annual target inflation rate set by central banks:
“In less than half a year, bitcoin’s supply rate increase will be cut in half.
Even if it doesn’t move the price, it’s a historic event in money.
Bitcoin will drop below gold’s ~2% yearly supply rate increase and below the target inflation rate of central banks.”
Will The Halving Really Affect Bitcoin’s Price?
The majority of people in the crypto space expect the halving to be a shot in the arm for bitcoin. For perspective, bitcoin has posted enormous gains in the run-up before and after halving in the past two times.
However, this time the scenario looks pretty different. We’re less than 6 months away from halving and bitcoin is trading sideways. As aforementioned, the majority of people are confident about the halving triggering a bull run.
However, due to the bearishness currently prevailing in the market, a few people believe the halving will not push the price upwards. One such person is Jason. A Williams, the Co-founder of digital assets management firm Morgan Creek Digital. According to Williams, the halving will be inconsequential.
“Unpopular opinion –
Bitcoin halving in May 2020 won’t do anything to the price. It will be a non-event.”
Although it’s somewhat a delusion to assume history will repeat itself; in the words of Mark Twain, it often rhymes.