Crypto analyst and economist Alex Krüger is weighing in on the intense debate over Bitcoin’s halving.
Analysts appear increasingly divided on whether the event, which will reduce the amount of new Bitcoin entering the market by half, will affect the price of the leading cryptocurrency.
Predictions are wide-ranging. Some say Bitcoin’s past price history shows halvings have an immediate and irrefutable bullish effect on BTC. Others say Bitcoin’s price will rise in the months before the halving. And plenty of forecasters say traders should be prepared for the halving to have no impact whatsoever.
As for Krüger, he says the run-up to the halving will be key.
“Discussing if the bitcoin halving is priced in or not a full *five months* before the halving takes place makes no sense. The date is too far off for the market to have any clarity about it.
If price experiences a significant bull-run into the halving, one could then think halving *may* be priced in. For a somewhat analogous analysis, can have a look at how price run up into CME futures launch in Dec/2017, or look at risk assets around elections or FOMC events.”
He says the event is definitely not priced in due to the simple fact that no one knows what miners – who essentially create and earn new Bitcoin by verifying transactions – will do.
“The ‘priced in’ argument is based on miner issuance reduction being fully deterministic (i.e. known). However, miners’ behavior is not so. Miners speculate with inventories, and accumulate. Supply may thus decrease at the halving, or even increase if prices are not high enough.”
Priced in = market already positioned— Alex Krüger (@krugermacro) January 7, 2020
? Demand side: a big chunk can come from outside crypto => not priced in
? Supply side: don't know how miners will react, actual supply can go up or down
=> Halving is not priced in
=> Could be bullish or bearish
Bitcoin’s halvings happen approximately every four years, with the next one coming in May. They are designed to slow the pace of new BTC entering the market until the total market supply of 21 million coins is reached in 2140.