Supply of Bitcoin (BTC) has a set upper limit of 21 million BTC, and therefore halving (timing when rewards for mining BTC to provide new supply to the market are cut in half) happens roughly once every four years. The next halving is scheduled in 1½ months on May 11, and attention is focused on the event as it tightens supply and demand.
Take for instance the BTC halving on July 9, 2016. The event was absorbed when the price of BTC peaked about 20 days before the halving and then fell for 24 days after, dropping to $547 on August 2, 2016. This $547 low marked a bottoming out from which the price of BTC continued to rise from until December 2018, when it reached a record high of $19,400.
LTC took 9 days from its halving to bottom out (on September 3, 2015), while MONA took 29 days (on August 14, 2017). A pattern can be seen where the price bottoms out somewhere around 10–30 days from its halving before shifting to a rising market.
When analyzing the rate of decrease in the price of each cryptocurrency from the time of its halving until bottoming out, the average fall was 12%, with BTC dropping 16%, LTC 11% and MONA 9%.
Looking at price fluctuations around the times of past BTC halvings, if the price of BTC is $6,000 on the day of halving (May 11), for example, it should fall to around $5,280 sometime between May 20–30, thus bottoming out and shifting to a rising market thereafter.
However, there are immediate concerns. Halving means the rewards BTC miners receive for mining (performing calculations necessary to maintain networks for new BTC issues, handling transactions, etc.) will be cut in half, so there could be a dramatic decline in miners if the BTC price does not justify the cost of mining. It is imperative that the price following the next halving is adequate for miners. If the resulting price is insufficient and the number of miners declines dramatically, there is a possibility the network will destabilize and give cause for a decline. It’s crucial to keep watching price fluctuations and mining-related issues before and after halving.
*This article was written by FISCO.