As reported by Cointelegraph, China’s National Development and Reform Commission has removed Bitcoin mining from an industry that could have been removed and made illegal. This news comes on top of the premier of China announcing public support for blockchain technology and a statewide education campaign of what cryptocurrencies are to the entire population. No doubt, this bullish news coming from China will contribute to an almost certain spike in participation over the coming months.
One of the most significant events in Bitcoin’s history (and future) is an event known as ‘the halving.’ A halving event occurs every 210,000 blocks and decreases the rewards given to miners. To those familiar with traditional monetary policy, this may seem odd. Central banks increase the supply of money by printing more and more money, creating an inflationary event. Bitcoin is the opposite. When the block amount threshold is met the rewards decrease. For this halving event, the rewards are reduced by half – from 12.5 Bitcoin to 6.25. This is a deflationary event. However, Bitcoin has a fixed supply.
There will only ever be 21,000,000 Bitcoin in existence. With 18,034,338 Bitcoin already out for use, there remains only 2,965,663 Bitcoin. People often wonder what kind of effect halving has on Bitcoin. Historically, the event is exceptionally bullish. This is not the case for all cryptocurrencies, however. Litecoin experienced its most recent halving even on August 5th, 2019. How has Litecoin performed since the halving? Poorly – but no less poor than the aggregate cryptocurrency market. Litecoin traded as high as 107.40 on August 5th, 2019, before declining to the most recent swing low of 47.22; a -55.89% loss. The reasons for this drop could be many and varied, but more than likely Litecoin was just another victim of a broader selloff that has occurred ever since the latter part of June 2019.
Theoretically, halving events should have a longer-term bullish effect. If demand continues to rise for Bitcoin, then the continued decrease in supply will increase the value of existing Bitcoin. It may become so valuable that the profitability of mining may again turn into a massive battle between a few organizations with significant capital and access to cheap energy. Historically, Bitcoin experiences a considerable amount of bullish activity before its halving events. So when does the next halving even for Bitcoin take place? 189 days from today. This halving event comes as cryptocurrencies are continuing to build towards the end of a consolidation cycle and enter into another significant bull phase. I am anticipating Bitcoin to test well above the all-time high. The price action we should observe across the entire cryptocurrency market should continue to repeat the same price action that occurred post-Mt. Gox. 2020 has a high probability of repeating the same trending price action that Bitcoin experienced from 2016 to 2017. And, if between now and the halving event in 2020, Bitcoin experiences some recognition by large regulators like the US’s SEC, we could see an influx of traditional investment capital that would likely result in a bull move exceeding what was observed in Q4 of 2017.