The block reward halving has typically served as a key fundamental factor behind the dominant cryptocurrency’s major rallies.
Price one year before first halvening : $2.55
Price one year after first halvening : $1,037
Price one year before second halvening : $268
Price one year after second halvening : $2,525
Price one year before the third halvening: $7,100
Price one year after the third halvening:
— The Rhythm Trader (@Rhythmtrader) May 17, 2019
From July 2016 to 2017, within a year following bitcoin’s block reward halving, the bitcoin price spiked by nearly 10-fold from $268 to $2,525. In previous years, the asset similarly saw large gains subsequent to the halving.
Will bitcoin continue to surge throughout 2020?
The past performance of an asset does not serve as a guarantee for the future performance of the asset. As such, merely because bitcoin saw substantial gains in previous years triggered by a particular factor, it does not definitively guarantee that the asset would increase by a similar rate in the future.
However, the block reward halving of the Bitcoin blockchain network poses a significant impact on the rate in which bitcoin is generated and supplied to the market.
If the demand for the asset remains the same or increases over the medium- to long-term but the supply of the asset decreases, it may reasonably cause the value of the asset to spike.
For that reason, after the first and second block reward halving of bitcoin, the price of the asset rose anywhere between 10- to 500-fold against the U.S. dollar.
Max Keiser, a host of the Keiser report on RT, has recently said that the bitcoin price is expected to surge to $100,000 and that institutions would play a key role in driving up the demand for the asset.
“Bitcoin is making the institutional play now, and there is going to be a mass fear of missing out… or FOMO is going to jump to the institutional level and they have got the big bucks, and now we are going to see some big moves,” Keiser said.
With trusted custodial service providers in the likes of Fidelity preparing to officially launch a regulated custodial platform for investors and institutions such as TD Ameritrade reporting tens of thousands of clients already trading crypto-related assets, the prediction of a large increase in the inflow of capital from institutions is not far-fetched.
It remains to be seen whether the block reward halving would further fuel the interest toward the asset from both retail and accredited investors.
In March, Pantera Capital, the first billion-dollar crypto fund, emphasized the bitcoin block reward halving as a potentially important inflection point.
The team said:
“There’s intense interest in the ‘halvings’ as those every-four-year cuts in bitcoin supply are called. Although there’s only a few data points, it seems that bitcoin’s price has shown patterns with block reward halvings. We have seen a couple of these cycles where the tide begins to shift roughly a year in advance of these dates. Inflection points occurred 376 and 320 days prior to the 2012 and 2016 ‘halvings’, respectively.”
Optimistic fundamental factors
Alongside the scheduled halving, the overall volume of the crypto exchange market is on the rise, the daily bitcoin transaction volume has been steadily increasing since early 2018, and the infrastructure supporting the asset class has drastically improved in the past six months.
These factors combined are expected to act as the foundation for the next rally of bitcoin and the rest of the crypto market, especially considering that the crypto market tends to move by cycles.