A popular crypto strategist who says Bitcoin will likely hit $50,000 to $100,000 by 2021 is analyzing the risk of a “death spiral” that could thwart his prediction.
The anonymous analyst known as PlanB is pondering whether the upcoming halving – which will slash the amount of BTC miners earn for processing transactions in half – will convince miners to switch off their rigs en masse. The scenario could, in theory, start a so-called miner death spiral that increases Bitcoin confirmation times, lowers confidence in the network, and drags down the price of the leading cryptocurrency.
PlanB posted a Twitter poll on the issue, with 13% of respondents saying the scenario is a real risk to Bitcoin’s future.
Do you think May 2020 #bitcoin halving of miner reward will cause a mining death spiral or miner capitulation?
— PlanB (@100trillionUSD) January 22, 2020
PlanB says he believes the risk of a death spiral is “effectively zero” due to a built-in feature on the Bitcoin network that automatically adjusts how much computing power is required to process transactions.
When there are fewer machines battling to verify transactions and earn BTC, the difficulty drops. The process is designed to make it easier to earn Bitcoin and make mining more attractive to those who decided to turn off their rigs.
The analyst is sticking by his hypothesis that Bitcoin’s halving will spark a long-term rally.
His bullish outlook is based on the stock-to-flow ratio, which measures the total supply of an asset divided by the amount produced each year.
“In my opinion, co-integration between Bitcoin’s price and stock-to-flow means all network effects march lockstep: Investors, Speculators, Merchants, Consumers, Miners and Developers together… demand and supply, like clockwork!”
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