While, for the majority, Bitcoin upcoming mining reward halving event has been heralded as a chance for the coin to regain its famous price action and head back towards the highs of $20,000 seen in December 2017, there are some imminent concerns to deal with.
The halving event is a rather daunting one in the entire Bitcoin ecosystem as it involves cutting the supply of the amount of Bitcoin coming into circulation — which can, of course, increase demand and price via macroeconomic theories. But, it also means that the mining community, so integral to the health and well being of the Bitcoin blockchain, are suddenly less incentive to mine the chain.
It has been seen before that straight after a reward halving there is often a time dump of coins which leads to a fall in the price following the cut in reward. However, there is also a theory that this may not come to be as the Covid-19 black swan event has already struck the market and knocked it off its predictable kilter.
A group of industry experts have come together under Chainanalysis to discuss the impact of COVID-19 on Bitcoin and what it means for the future.
Lessening the blow
Chris Bendikson, Head of Research at CoinShares, said he believed the recent price crash in March had prepared miners early for the halving, which will reduce the sudden impact it could have had on their profitability. It was that event that already forced less profitable miners to evacuate, which led to the mining difficulty dropping.
“The result being that after the halving passes, plus maybe some months of potential hazard volatility, the industry, the mining industry will be in a much stronger position with an overall lower cost base.”
“What that means is that miners are likely to not have to sell as high of a proportion of their mined coins as before the halving and the actual halving, when you add that to this, means that we’re potentially about to see a midterm bullish virtuous cycle in the making.”
A perfect storm
Bitcoin was created in the wake of a financial crisis, and with the future looking set to face another Covid-19 inspired one, people are wondering if Bitcoin is the answer to this issue. It may be a bit premature for Bitcoin to be the financial saviour, but according to Alex Laughton-Scott, Associate Director of CoinShares, there has been a light shone on Bitcoin’s potential.
When asked if the fundamentals of the coin had changed, he responded: “The short answer would be: absolutely not. And this global setup is one that very much could show Bitcoin, Bitcoin’s uses and values in their entirety. We could be possibly witnessing a bit of a perfect storm brewing for Bitcoin in the medium term.”