Market Insight on How Halving Will Impact Bitcoin Price
As the topic of the likely impact of the 2020 block reward halving rages on, a provider of institutional trading tools for digital currencies has released an estimate that shows the breakeven costs to mine a Bitcoin at current levels and device types would exceed $7,300 (estimated current breakeven cost) after the halving.
TradeBlock expects Bitcoin price to rise above estimated mining breakeven levels if the halving slated for about 40 days plays out similarly to the prior two halvings.
That is, based on the majority of mining equipment operated by commercial cryptocurrency miners having similar device specifications and maintaining current hash rate (~110,000,000 TH/s), the post-halving effect could see network hash rate increase in the following three months for Bitcoin mining – at a network hash rate of ~135,882,500 TH/s – to cost about $15,100.
“In 2020, we estimate that miners were operating at healthy margins in the first few months of the year before the recent market crash pushed miners into the red,” their report says regarding Bitcoin price’s recent ~30% decline. “Following the 2020 halving, we project mining breakevens to rise to between ~$12,000-$15,100 per coin assuming the hash rate stays near current levels or rises following a modest growth rate.”
The estimated negative profit margins at which miners have supposedly been operating are likely to widen until and unless the price of Bitcoin goes higher, they suggest, though highlighting other conditions that are present today to make the 2020 halving different from prior halvings when the network was less mature. They include the less mining operator influence today as against previous halvings when only few major players call the shot; general market risk associated with economic decline especially around the COVID-19 crisis which has crippled some sectors globally; and increased mining cost efficiencies.
Bill Barhydt, the founder of global peer-to-peer digital cash transfer network, Abra, tows the line of the pending halving – alongside other factors – pushing Bitcoin price higher. In his latest crypto update, Barhydt says it is safe to say volatility has returned to Bitcoin after months of relative calm, its recent plummet in price and a crawl back hence he is more bullish on Bitcoin now than before as the factors “could lead to an explosion in Bitcoin’s price”. Top among them is the coming Bitcoin halving which he believes will be “a big shock to the mining community as well as the investment community” that its intended impact has not been priced in.
He adds that the halving is particularly crucial when combined with expected quantitative easing measures that could see between $5 tln and $10 tln in new money released globally to cushion deflationary pressures of the Coronavirus disaster. People will seek out appreciation and yield to address this new dynamic and Bitcoin could “likely becomes more correlated to gold and less correlated to discretionary investment spending.”
More fiat currencies failing in two to four years could lead to inflation, negative bank rates and super high lending rates that will strain the banking system and trigger the awareness for Bitcoin as a hedge among many people. This will collide with the exciting new opportunities that are now available for people to earn with Bitcoin beyond just price appreciation, he adds.
However, while the Bitcoin Association President, Jimmy Nguyen, agrees that the coming halving may drive Bitcoin price up, he argues such a move is not based on fundamentals.
“In theory, the upcoming halving should not affect the price of Bitcoin; but in practice, many investors in the market still seem to think that it will temporarily drive up the price of Bitcoin – so it may well end up being a self-fulfilling prophecy,” he says touching on a “misguided thinking” that is not related to the technology’s real utility. “As a result, we could see further increases to Bitcoin’s price as we approach the next halving (in April for BCH and BSV, and in May for BTC), even though the halving itself does not warrant an increase in price.”