Uncertainties on a global scale continue to spread amid the crisis brought about by the COVID-19 pandemic, leading to massive market swings and drastic changes in fiscal policies. Investors are taking decisive actions to safeguard their portfolio by diversifying into digital assets such as Bitcoin which is proving itself unrelated to other assets affected by unpredictable market shocks.
The predictable phenomenon of Bitcoin Halving transpires this May 2020, which, historically, cause increases in bitcoin price. As it happens every four years, this halving of bitcoin rates creates new bitcoins due to the rise in its demand. This Halving event was designed to control inflation, thereby controlling supply that would lead to rate hikes. The law of supply and demand presents itself in two scenarios:
1. When supply is high, and demand is low, it leads to a decrease in the price of the asset or product.
2. When supply is low, and demand is high, it leads to an increase in the price of the asset or product
The bitcoin halving event first occurred in 2012 when the mining reward was reduced to 25 Bitcoin from 50. The second was in 2016, which saw the reward down to 12.5. It is expected that the reward will be down to 6.25 when the third halving event takes place in the middle of May 2020.
The current global health emergency crisis and the halving event buildup presented a unique odd coupling as bitcoin exchanges worldwide are recording strong growth in new users and signups, with over 90% expected to buy more or hold on to their crypto in sharp contrast to around 5% or fewer users who are opting to sell within six months. Optimists are predicting a price swing to all-time highs within 12 to 18 months as historically have been with the last two halving events showing 81 times and 3 times uptrend, respectively, after one-year periods.
As opposed to fiat currency, which is inflationary in nature, any Central Bank can print up to trillions in circulation accordingly. Bitcoin is so scarce that only 21 million will ever be in circulation, therefore making it a deflationary asset. That is why investors are incentivized. Currently, there are already 18 million circulating for the past 11 years in a predictable supply schedule via a process called mining. As more Bitcoin is entered on a daily basis, miners play pivotal roles in providing computational resources by verifying transactions into the Bitcoin network, or blockchain. In return, they receive Bitcoin as rewards. Predictably, for every 210,000 blocks of transactions confirmed, or in every four years, the amount of reward is cut in half.
Satoshi Nakamoto incorporated this halving event into the bitcoin protocol by cutting the new Bitcoin supply in half, as well as the miners’ block production rewards. With the 21 million cap, Bitcoin will eventually run out, and miners will then be paid transactional fees instead of Bitcoin. By estimation, the last Bitcoin will be mined by 2140 by the 64th halving event.
From a 48% sudden drop in bitcoin price when the pandemic panic broke out last March, it quickly rebounded to 80%, from $3800 up to $6,206, and still is 33% up since last year, proving its resiliency amid asset shocks.
In hindsight, after the 2012 halving event saw the price of BTC/USD going $11 to $12, and in a span of only a year, pole-vaulted to $1,038. Four years later in the halving event of July 2016, Bitcoin went from $576 to $650 then went on a surge to $2,526 after precisely a year. Experts predict an all-time high of $250,000 by 2022.
However difficult it is to predict Bitcoin price after a halving event, technical data, signs and signals have created compelling opportunities to invest in this deflationary asset.
Given this scenario, the present interweaving network of complex financial flow among currencies in an emerging world of technology makes Wallex a stable and trusted custodian in transaction management from fiat to crypto. Wallex presents an opportunity of buying bitcoins through instant processes such as bank transfers, credit/debit card transactions and individuals with Klarna accounts. Wallex serves as a confidant covering critical bases be it technical, legal, financial, or technological to make client enterprise secure in engaging with the digital economy and tokenomics as they enter into the new future of the market.