‘The Halvening’ looms large on the calendar for bitcoin miners. Set for May 2020, it’s the day on which miner rewards are halved. This effectively makes it more difficult for miners to do so profitably.
Built into the fabric of bitcoin, as a mechanism for throttling supply (and therefore safeguarding residual value), it’s coming. This is whether miners like it or not.
‘The Halvening’, which should occur in May based on forecasts of mining timescales, is in fact the third such instance to affect bitcoin since it first emerged in 2009.
Back in 2009, mining a single block came with a reward of 50 BTC. That amount is equivalent to almost $400,000 in today’s prices. It halved in November 2012 to 25 BTC. Then, again in July 2016, which brought the reward down to 12.5 BTC. In both of these prior cases, the halving sparked a significant bull run, sending prices soaring.
Yet in the bitcoin community, there is increasingly heated debate about what the next halving could do to prices.
The Case For A Bull-Run
The case for a bull-run feels intuitive, particularly given the results of the previous two. BTC has form for soaring off the back of halving events. Prices today remain some way shy of all-time highs, so it looks like there is potential for growth still on the table.
Then there’s the intrinsic price pressures caused by the restriction in supply. Because supply is being throttled and mining becoming less profitable, there should in theory be less new BTC floating around. And where there’s scarcity, there’s value.
This also plays on the minds of miners, who are likely to reduce selling pressures by holding off on shifting their stock – why wouldn’t they, given an anticipation of higher prices tomorrow.
This is a view supported by some big names in crypto mining. Genesis Mining CEO Marco Streng said he believes prices are likely to increase, fueled by the psychological implications of the halving.
“It’s a psychological event, and there is a tendency for the price to increase. From my experience, a lot of miners are expecting the price to go up, so they reduce selling and weaken the selling pressure of the market.”
The Case For A Sell-Off
While the previous two halvings have sent prices skywards, there are influential figures in the crypto world who doubt the same can happen again.
Jihan Wu is the founder and former CEO ot mining hardware manufacturer Bitmain. He describes his outlook post-halving as “pessimistic”. He reckons that speculation around the halving could lead to BTC being overbought, with no guarantee of a follow-through on a bull run.
“Maybe people speculate too much before the halving, and then you can’t sell the good news anymore. Maybe, this time a bullish cycle is not coming yet.”
“During the first and second halving, people didn’t know what to expect, and during the second halving, the scaling debate complicated the situation. Now people are expecting it.”
He points to the case of Litecoin, which halved back in August – and saw prices decline, rather than increase. This came off the back of a bidding war that pushed prices up from $31 to $135. This was only for the halving to knock the value back down to $57.
Spare A Thought for Miners
No one knows for sure whether BTC is going up or down come May, and this is where the speculators will make (or lose) their money. But one thing that is for certain is the impact this will have on miners – particularly at the lower end of the volume spectrum.
It’s basically a halving of margins overnight, coupled with the ever-increasing computational difficulty of mining new blocks. For those feeling squeamish around calling BTC prices, a bet against smaller mining companies after ‘The Halvening’ might be worth a punt for some.
Uminers co-founder Alexander Gavrik said the market was gradually consolidating around larger, more efficient miners, with the margins and resources to survive ‘The Halvening’.
“The market is moving towards the industrial mining, and there won’t be hype like it used to be anymore. There are significantly less crypto enthusiasts on the market now.”