Bitcoin, which has already more than doubled in price this year to surpass $8,000 per coin, is seen rising higher by 2020 in anticipation of what many investors call the next great “halvening.” The event, also called “halving” in the crypto community, occurs every few years when the number of coins awarded to Bitcoin miners that use computers to process transactions are cut in half.

Halving is used as a means to prevent inflation from decreasing the value of Bitcoin. The next cut is expected to occur in May 2020, and should serve as a catalyst for more price gains by the largest cryptocurrency in the world, as outlined in a detailed Bloomberg report.

“Imagine if daily printing of U.S. dollars was suddenly cut in half forever. Bankers would be FOMOing even though USD isn’t a scarce asset," said Morgan Creek Digital co-founder Anthony Pompliano, a crypto enthusiast, in a recent twitter post.

The Crypto Bull Case

  • The next Bitcoin ‘halving’ is slated for May 2020
  • Sharp decline in block rewards will reduce Bitcoin supply significantly, while demand increases
  • Similar events in 2012 and 2016 were followed by major increases in the price of the cryptocurrency
  • Grayscale Investments LLC will open up investment vehicle that holds the cryptocurrency Ether to mom and pop investors after receiving secondary-market trading approval

Source: Bloomberg

Crypto Enthusiasts Point to Favorable Supply Demand Dynamics

The creator (or creators) of Bitcoin, who used the pseudonym Satoshi Nakamoto, capped the total issuance of coins at 21 million. A series of "halvenings" that reduce the supply by 50% should in theory make the assets more valuable by 2140, which is when the last coin is slated to be mined, as reported by Bloomberg.

In a survey of 2,500 individuals on Twitter, 61% said that they expect Bitcoin to continue its price momentum thanks to the halving. The sharp decline in block rewards would work to cut Bitcoin supply significantly, while demand stays strong. As supply and demand fundamentals drive the price of the digital coin to new 2019 highs, more investors will seek to get in on the frenzy, further driving up the price of Bitcoin.

Bitcoin bulls looking forward to the next big halving point to similar events in 2012 and 2016, which were followed by major increases in the price of the cryptocurrency. In November 2012, when Bitcoin was still less than four years old, the price of the digital asset flew to $1,000 from just $10 in the 12 months following its first halving. The second time around, in the aftermath of July 2016’s halving, Bitcoin peaked to an all-time high near $20,000 in December 2017.

Bitcoin Market Environment Changes

To be sure, not all are so upbeat about the next Bitcoin halving, with skeptics such as Eric Turner of Messari Inc. noting that “with a sample size of two, it’s hard to assign any statistical significance to the event.”

That being said, this time around is much different for Bitcoin, which has succeeded partly in pushing into the mainstream as it gains interest from institutional investors. This year, more mainstream investors and hedge funds already own bitcoin, while the price of the digital asset is now also greater influenced by the many Bitcoin derivatives that continue to emerge.

This as Grayscale Investments LLC announced that its investment vehicle that holds the cryptocurrency Ether will open up to small investors after receiving secondary-market trading approval, as reported by Bloomberg. Grayscale Ethereum Trust, launched in December 2017, was initially only available to accredited and institutional investors at a minimum of $25,000 through private purchases.

“The secondary market really opens up the opportunity for any and all investors,” said Michael Sonnenshein, managing director of Grayscale Investments.
Ether, the second largest cryptocurrency, has seen its price skyrocket this year alongside Bitcoin. After a nasty fall in 2018, Ether has more than doubled in value YTD to reach $273 on Wednesday.

Looking Ahead

Despite cryptocurrency bulls cheering the Bitcoin and other digital coins’ rally, major volatility has returned to the red-hot market. With that in mind, investors should brace for price upheaval even if the currency rises. Ultimately, the young cryptocurrency space is still no place for a weak-stomached investor.