In this article, we will talk in detail about the Bitcoin halving, find out what it is, analyze how this event affected the market previously, study the theories of top traders and try to understand what to expect in the future. So, first things first.submitted by neironixio to u/neironixio [link] [comments]
Inflation?The mysterious Bitcoin creator Satoshi Nakamoto was a real genius, as he came up with a rather smart solution to maybe the most important problem of any currency - inflation. The current Bitcoin rate inflation is 4% per year, while the US dollar 1,91%, the Indian rupee 5,24%, the Russian ruble 4,33%, etc. However, Bitcoin inflation will continue to decrease until it reaches 0% in 2140.
To begin with, the Bitcoins issue is limited, in total, 21 million coins will be issued. As you know, Bitcoins are not issued by any single centralized authority - they are mined. And by analogy with precious metals, the mining complexity will constantly increase, while the reward for the work done will decrease. The whole thing is the correct implementation of source code, as well as the so-called halving, which means that the miners get half as many coins every four years. Thus, by rough estimates, the last Bitcoin will be mined in May 2140.
What is halving and how does it work?To explain what halving is, let's first understand how Bitcoin works. So, this digital coin is based on blockchain technology, which is a decentralized data accounting book, exact copies of which are located on miner computers around the world.
As you know, each book consists of pages, in our case these are blocks. Each block has its own unique serial number. Miners solve complex mathematical equations to form a new block and receive a reward in the form of coins for the work done. The size of this reward is halved every 210 thousand blocks. Considering that about 144 blocks are mined per day, this event occurs approximately once every four years. This is what is called halving. The short Bitcoin history includes two halvings:
A brief analysis of the first halvingOn the day when the first decrease in the reward for the found block happened, the BTC rate showed a slight movement - the price increased by only 1.7%. But if you look at the big picture, you can see that the asset began to grow several months before this event, and just continued to move up after halving. Thus, the BTC rate increased from 13 to 260 US dollars in just four months.
This was followed by a rollback in price up to $80, but later a real bull race started and lasted until December 2013. At that time, the asset grew to unimaginable values, its rate reached the level of 1150 US dollars. Well, and of course, after such an increase, a tight correction of the price and a protracted bear market followed.
Pay attention to the complexity of the Bitcoin network during this event. The chart below shows, that the hash rate began to increase rapidly a few months before the halving, and the growth did not stop after it.
A brief analysis of the second halvingThe second halving occurred in less than four years - on July 9, 2016. This time, the reward for miners fell to 12.5 BTC. It is important to note that the time between the first and second halvings was 1316 days or 3.6 years. Moreover, if to analyze the data, you can see that the market started an upward movement about 9 months before the event. During this period, the BTC rate rose by 112%, and after the Bitcoin halving, it continued to grow till December 2017 and stopped at around $20,000 per coin.
We can also see how the hash rate increased against the background of the second halving. The chart below shows that the complexity of the Bitcoin network throughout the bear market in 2014-2015 was about the same value, but this figure began to grow rapidly about six months before the halving.
Therefore, the miners' interest in Bitcoin has grown significantly a few months before the event. And just like the previous time, the hash rate of the network continued to grow after halving.
In the run-up to of the third halvingAs we all remember, a rather encouraging 2018 followed the euphoria of 2017, and the rates of all coins fell down to 90% of their peak values. According to technical indicators and the general mood in the market, we can say that the bear flag lasted until April 2, 2019. On this day, the Bitcoin exchange rate rose from $4,100 to almost $5,000, then an upward movement began. Note that this happened 13 months before the upcoming halving.
Further, the BTC rate continued to grow rapidly and reached the level of $14,000 at the end of June, followed by a rollback and the price held at around $10,000 for a long time. But on September 24, 2019, there was a fairly powerful price drop, the rate fell by $1,500 in less than a day, and at the time of this writing, the market price of one BTC coin is $8,200.
Note that the resumption of BTC growth this year was again accompanied by a significant increase in the hash rate. The complexity of the network from April to September has more than doubled, and it continues to increase.
How will halving 2020 affect the price?Many market participants are wondering how will the third halving affect the market situation? Unfortunately, we can’t know the future, we can only analyze the current situation, compare it with historical data and draw certain conclusions.
In this article, we take the theories of two famous traders - Bob Lucas and Sunny Decree. They both analyzed in detail previous halving and made their forecasts regarding the market reaction to the next halving.
Sunny Decree TheoryHe believes that the expectation of a halving will lead to Bitcoin price rise, as it was in previous times. He uses the BLX index to confirm this theory - this is the most complete history of the BTC price on the Internet, this is data actually from its very foundation.
The first cycle until November 2012 (before the first halving) is not so important for us since at that time Bitcoin was still a fairly new concept. Almost no one knew about its existence, and there were not many exchanges where it could be traded. However, we can use the second cycle as a projection for the third, in which we are now. The key role in the formation of new cycles is not in the reduction of inflation itself (that is, the Bitcoin halving), but trading activity in anticipation of it.
Each of these cycles can be divided into several phases:
Now let's move on to the price forecast. The difference between the high of the first and second cycle is about 3600%, between the second and third - 1600-1700%. That is, each time the profit as a percentage goes down, so the third cycle was approximately half weaker than the second. As a result, according to Sunny Decree's theory, projecting the estimated percentage of growth proportionally, we can expect that the next BTC high will be at around $185,000. Using the structure of the third cycle, we can suggest that the peak of the bull market will happen in the summer of 2021.
Bob Lucas theoryNext, let's look at the theory of professional trader Bob Lucas. He analyzes the so-called cycles. In his opinion, the last four-year cycle (which contained 52 weeks in the drop and 153 weeks in growth) came to its end, it took 205 weeks in total.
Bob Lucas believes that the price we saw on December 10, 2018, was the end of this cycle. It is important to understand that the video in which he tells this theory in detail appeared on his channel on April 2, 2019 - on the very day when the market began to grow, so six months later we can notice that he was right in many ways, but not in everything.
So, Bob Lucas says in his video that at the beginning of a new cycle we will see the incredible power that will rapidly push the price to new levels. Lucas noted that at the time of recording the video, a lot of people are beginning to actively buy BTC in hope on rapid growth.
He believed that in April the market was not yet at the stage of the final bull race. He said that there will be growing up to plus or minus $6,000 in the near future, followed by a tough correction that will unsettle many weak investors. In his opinion, during this correction, the price may even update the December bottom, and only after that, a new cycle will begin, which will last about 150 weeks in growth. As for the final price, he does not have a specific figure, but he believes that the rate of the first cryptocurrency will be more than 100 thousand US dollars.
He stated that a hard correction should happen around August 2019, but in fact, it did not happen. Even though he made a mistake with the time frame and the estimated rate of BTC, he predicted the vector of the development of the situation quite correctly. Recent events are an excellent confirmation of this when on September 24, 2019, the BTC rate fell by $1,500 in less than a day. It was the correction Bob Lucas spoke about, but it happened a month later than he expected. Yes, it`s not likely that the rate falls to $3,000, but in current conditions, it is quite realistic to imagine a BTC rate of $6,000. Indeed, many analysts and experts agree that the “bloody Tuesday”, September 24th was not the final fall, it caused the next phase of accumulation of assets, which will take some time.
Neironix research department opinionLet's drop someone else’s opinion and do what professional investors usually do - just take the facts we have and analyze them with a cold head.
But it is important to understand that this article is not a guide to action since the digital coin market is quite unpredictable and it is a rather difficult task to foretell any outcome in advance. Do not invest in cryptocurrencies more than you can afford to lose. If you spend more money than you can effort, then you will not be able to think rationally and survive often storms in this young market. Treat your investments with a cold mind, and then you will succeed.
ConclusionBitcoin has already survived two halvings during its short history, and in less than nine months, we will see another decrease in the reward for miners. If you carefully study the charts, you can see that the BTC rate always grows before the halving. And after it, the market goes into a phase of parabolic growth, it lasts about a year, and then comes the correction and a protracted bear market.
A similar scenario has already been repeated twice and many traders believe that we will see a similar picture in the future, since the next halving should take place in May 2020. We observed a significant increase in the hash rate, the number of wallets, transactions and an increase in the rate of the main cryptocurrency 13 months before this event.
Earlier that we carried a detailed analysis of the current state of the Litecoin cryptocurrency, and also analyzed its behavior against the background of the recent halving that took place on August 5, 2019. If you are interested in this topic, here is a link to our study.
We assume that the Bitcoin price doesn’t change, that all miners are rational and that a significant proportion of miners are not already operating at a loss. With the price volatility that is sure to follow the halvening it may not even be possible to tell if our methodology and calculations were correct. However, we believe that we have introduced a useful framework to evaluate the mining ... Bitcoin system, when more than 51% computing power is controlled by a single node, the block chain can be distorted maliciously. This is called 51% attack which is a well-known potential risk that could destroy the Bitcoin system. The paper proves that under the current proof-of-work mechanism, computing power eventually will be centralized at a single node if miners are rational enough. A rational miners motive is to maximize ... We use a similar approach to that of Gervais et al. (2016) in solving the MDP and generate a decision matrix. This decision matrix contains the actions taken by an attacker depending on the value of a and h. For example, an attacker with α = 30 and γ = 50 with a = 2 and h = 0 would perform a wait action as he is ahead of the main honest chain by 2 ... Bitcoin Era refers to a trading robot used to make money online. It takes personal interests into account, helping people to. 16 Feb 2016. Featured. Arm benchmarks: Apple silicon trounces Microsoft's Surface Pro X in first tests · Best robot vacuums for the office in 2020: Roborock, 4 feb 2019. In deze Bitcoin Miner review […] When Bitcoin was invented as an open source code, the blockchain was wrapped in the same solution. Bitcoin miners are engaged in complex and intensive computational equations to verify the legitimacy of the transaction. Many features separate the Bitcoin blockchain from a business – designed blockchain. Private Blockchain. Bitcoin and other cryptocurrencies are now protecting their ...
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