A few moments are left for the 3rd Bitcoin Halving in history.
But first of all, what is the Bitcoin Halving?
A Bitcoin halving event is when the reward for mining Bitcoin transactions is cut in half. This event also cuts in half Bitcoin’s inflation rate and the rate at which new Bitcoins enter circulation.
The event takes place every 210,000 blocks mined, or about every 4 years.
This process will continue until around 2140. At that point, miners will be rewarded with fees for processing transactions that network users will pay. These fees ensure that miners still have the incentive to keep the network going.
Why the Halving is an Important Milestone?
The halving is significant because it marks another step in Bitcoin’s dwindling finite supply. There are only 21,000,000 Bitcoins in existence. At the time of writing, there are 18,372,388 Bitcoins already in circulation, leaving just 2,627,612
In 2009, the reward for each block in the chain mined was 50 Bitcoins. After the first halving it was 25, then 12.5, and in just few moments It will be 6.25 Bitcoins per block every approximately 10 minutes.
As a result of Halving, inflation will also fall sharply. Specifically, it will go from 3.64% per year to just 1.80%
Stock to Flow Ratio
The reduction that will occur creates a supply shock in bitcoin.
This is because the new bitcoin that will be mined each day after the halving will be 900 while today it is 1,800
In 2019, a Twitter user named Plan B created for the first time a mathematical model for predicting the evolution of the price of Bicoin.
In simple terms, the model takes into account the number of Bitcoin already in circulation and the number of NEW bitcoin, the ones that are mined every day.
So we have a real time display of the scarcity that Bitcoin has.
It is a model that still seems to be working and Halving is an event that changes the dynamics of the model every 4 years.
One thing you need to know is that based on this model, Bitcoin will become even more scarce than gold after the next Halving and specifically around 2025.
What can we expect with the price?
According to the Stock to Flow model, the price of Bitcoin will be around $100,000 by the end of 2021.
But the end of 2021 is far for now. What happens until then?
As I have mention again, Halving will probably be a Buy the Rumours, Sell the News event.
We see this happening today and it has a logical basis.
Investors or Traders who bought a few weeks earlier, now want to make some profits after a rally of about 100%
What is my Strategy?
I’m used to the great volatility that bitcoin has and I’m able to ignore the short term price changes.
And this strategy is proving to work as you can see from my stats.
So I personally expect 2 short term events:
1st the price may go down even to $6,000
With the new Halving most Miners will be unprofitable if the price drops below $6,000 and I can’t see the price dropping even lower.
2nd I think we will not see a major rally until the end of July as the reduction of the supply takes some time to habe an impact in the price of bitcoin.
Both of these events for me are another buying opportunity, MAYBE our last at these prices! Enjoy!!