Things You Need To Know About The Bitcoin Halving And Ethereum’s Competitors Nearing Launch

A Lead Up to the 3rd Bitcoin Halving

To date, Bitcoin has undergone two halvings (2012 and 2016), and we are quickly approaching the third.

For background, Bitcoin pioneered a deflationary economic model by setting an upper limit of 21 million Bitcoins. In order to spur adoption, issuance was initially set at 50 BTC per block (every 10 minutes), and set to decay in half every four years as the network presumably grows more valuable. This event is now colloquially dubbed the halving.

Today, 18 million Bitcoin have already been mined (86% of the final supply), with 12.5 new BTC (~$125K) issued every block. This will drop in May 2020 to 6.25 BTC (~$63K).

In inflationary terms, this moves Bitcoin from ~3.6% annual inflation to 1.7%, less than USD’s target inflation (2%) and roughly on par with Gold, potentially strengthening the narrative of Bitcoin as digital gold — a new kind of store of value.

Graph from BashCo.github.io

Following simple supply and demand analysis, each halving decreases supply, and is commonly believed to be a driver for increased price. But what has happened in past halvings, and what can we learn?

BTC’s Momentum After Past Halvings

Bitcoin’s 1st halving occurred in early 2012, when the Bitcoin ecosystem was small, fragile, and volatile.

Following a long sideways market in 2012, the 1st halving itself was anticlimactic but was followed a few months later by a significant bull market; smashing new all time highs and setting Bitcoin up for an explosive end to 2013, crossing $1300.

Fast forward 4 years, once again Bitcoin was in a long sideways market after falling from the $1300 peak in 2013. The halving itself was again nondescript, but bitcoin began to build strong momentum ~6 months later leading to the unprecedented 2017 run.

3rd Halving on the Horizon

Following the first two halvings, we note that most of the exponential growth occurred after the halving. In fact, in each circumstance the halving itself was more of a non-event and any possible impact took ~3–6 months to appear.

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Unless otherwise noted, all images provided herein are by Coinbase.

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