Bitcoin (BTC) just underwent its third-ever halvening (or halfing), an event that occurs every 4 years where the Bitcoins awarded to miners per block of Bitcoin mined is halved. Starting on May 12th, miners would be awarded 6.25 Bitcoins per block instead of the previous amount of 12.5.
The Halvening a non-event
Ramping up to this much-discussed event, individuals from all scopes of business have pitched in with their expectations of where the currency’s value will land next. Some predicted a psychological effect instigated by the halvening that will push the value of the currency to astronomical levels over the long term, to $100,000 even.
“Imagine if OPEC cut production in half overnight. what would happen to the price of oil? It would go up,” said Zac Prince, CEO and co-founder of BlockFi, a firm that makes loans with cryptocurrencies, as per CNN.
What followed the halvening, however, was a lackluster, and surprisingly mature and measured, response.
Bitcoin didn’t shoot up to fantastical levels – most long-term gains seemed to occur before the event itself, which actually saw a short-lived drop in BTC value post-May 12, though this has since taken an upward turn.
As of this writing, Bitcoin is trading at 9,616.54. This is likely due to the fact that halvenings always have a set date, which means investors are likely to ramp up purchasing of the currency leading up to the event, as we saw this year.
“Bitcoin reversed the sell-off from $10,000 to $3,867 seen in the first half of March in the eight weeks to May 7,” CoinDesk confirmed.
“Halving was already priced in and the cryptocurrency could trade in the range of $8,000 to $10,000 in the near term,” Cynthia Wu, head of business development and sales at digital assets financial services firm Matrixport, said regarding the effect of the halvening on BTC prices.
HODLers take holdMeanwhile, other investors and industry individuals have adopted a wait-and-see approach, insisting that Bitcoin remains too volatile and is a safer investment to hold onto and wait rather than actively trade in.
“I know a ton of people that got into bitcoin in late 2017 at the peak, and I feel for them,” Daniel Polotsky, CEO of CoinFlip, a bitcoin ATM company, also told CNN. “But it’s a marathon. You need to own bitcoin for decades. A majority of traders will lose money trying to time market moves.”
Actions seemed to follow words, as data by Glassnode, a blockchain data and intelligence provider, revealed that users are holding around $220 million more Bitcoin since the halving, or around 24,000 BTC, indicating decreased faith in exchanges’ security, as well as taking a hold approach as HODLers sit on their stashes of the cryptocurrency. After all, Bitcoin is highly speculative if anything, and no one can consistently predict its trajectory. So, the safest approach becomes to wait and see.
This same approach, however, has also prompted another line of thinking.
Bitcoin as the digital gold
With uncertainty in vogue, courtesy of COVID-19, some investors are looking at Bitcoin as a “safe haven,” not much different to how gold is looked at in financial markets, especially during times of uncertainty. We discussed this late last year, and it seems this Bitcoin perspective has only found more believers during the ongoing pandemic.
“This halving is transpiring at a time when governments are enacting unlimited amounts of monetary and fiscal stimulus,” said Michael Sonnenshein, managing director with Grayscale Investments, a digital currency asset management firm, as per CNN. “Bitcoins are now viewed as a safe haven — kind of like digital gold. It’s a verifiable scarce asset with predetermined and predictable supply,” Sonnenshein added.
According to an April 2020 Bloomberg report, Bitcoin will mature into a gold-like store of value this year, as per Bitcoin.com. A store of value is an asset that maintains its value without depreciating, commonly things like valuable metals such as gold and silver.
“This year marks a key test for bitcoin’s transition toward a quasi-currency like gold, and we expect it to pass,” the report says.
Perhaps more shrouded in uncertainty than even Bitcoin is this unprecedented coronavirus outbreak which has upended the order of the world, so we’ll have to wait and see if it will truly push Bitcoin into official “digital gold” territory.