Experts believe the price of Bitcoin could lower drastically after the halving next week.
Bitcoin has been experiencing notable gains in the past month, with the cryptocurrency growing from $6,700 to $9,400 between the 20th and 30th of April alone. However, experts are concerned that these gains could soon turn around due to the Halving.
Halving is crypto-speak for an event wired into the bitcoin code, which halves the reward per block mined every four years. This was Satoshi Nakamoto’s attempt to control inflation. From May 22 to 24, only 6.25 BTC will be issued instead of the current 12.5 BTC.
Experts have turned to historical data in an attempt to predict the aftermath of this year’s halving. It has been noted that similar price rallies have also occurred in the weeks leading up to the halving in 2012 and in 2016.
2012’s halving saw prices begin to rise slowly after the event. It took around twelve months for Bitcoin prices to reach $1,000, which was an all-time high at the time.
On 2016’s halving, which occurred on July 16, the price of Bitcoin fell by ten percent to $610, but quickly recovered what it lost and returned to its original position. There was not enough evidence to connect the cutback in Bitcoin’s minting rate to a long-term impact on its price.
However, while the impact on the price was incremental immediately after the event, the market did experience a steady increase in the year after. Some believe that these gains were a delayed result of the halving event.
This year’s event is markedly different because it is happening amidst the Coronavirus pandemic. COVID-19 has dealt a blow to the global economy and pushed financial institutions as well as governments around the world to find new ways to stimulate their financial system.
With this in mind, experts believe that people are more incentivized than ever to search for alternatives such as bitcoin, which decreases in number with every Halving. They predict that should and price plummets occur, these would be short-lived and bitcoin is well-positioned to set new highs in the next year.