Sentiment in Bitcoin Remains Strong as Halving Less than 6 Months Away
Bitcoin’s block reward is due for another infamous halving come May 2020. This reduces the amount of bitcoin rewarded to miners for ordering transactions and creating a new block. Skeptics believe the price of bitcoin may not react the way most people expect, while the “ultra enthusiasts” are still confident that the halving is an economic phenomenon that is vital for Bitcoin’s bull thesis, reported by Bloomberg.
Believers vs Naysayers
The arguments for and against the halving both have their own set of merits and drawbacks. Those who believe the halving does not necessitate an increase in price agree that there is a strong correlation between halvings and bull markets, but make a case that there’s no strong logic to convince them of causation.
On the other hand, the maximalists see the halving as a supply crunch, which reduces the amount of BTC entering the market while keeping demand stable. As this demand surplus increases price, it leads to an even larger amount of demand, thereby creating a cascading effect of demand increases. There is logic and emotion rooted in both arguments, but it is impossible to understand what happens until the halving actually occurs this time.
That said, one thing is for sure – the market is infinitely more mature than it was in 2012 or 2016, so comparing market structure then and now on a one-to-one basis is not justified. Whilst the economic effect a halving creates on-demand and supply cannot be written off, it remains to be seen if it can create the necessary demand surplus to pump price.
Is the Halving Priced In?
Another point of debate is whether the halving is priced in or not. Again, there are coherent arguments from both sides, but this time the critics have a much weaker argument. The thesis for the halving being priced in is predicated on the market knowing that it is coming and integrating it into their valuation.
As a monetary asset with no quantifiable intrinsic value, Bitcoin cannot be valued like a stock, whereas a forecasted earnings increase can be priced into the stock today. The effect of the halving is a direct crunch on supply relative to demand, and the effect of this can only be known once it happens in the open market.
Maybe it will have a significant impact, maybe it’ll have no impact. But to say the halving is priced in would be to ignore the basics of Bitcoin’s demand-supply based pricing.