Take a look at the popular Bitcoin websites and you will see something curious. The smartest Bitcoin analysts seem to be divided on the future of Bitcoin in the wake of the 2020 halving. Some say that Bitcoin, and other crypto tokens by default, are headed to the moon after Bitcoin halves. Others say that the worst for investors is yet to come. The only thing anyone can agree on is that the Bitcoin halving is almost here. As for its effect, who knows?
Is Bitcoin Going to the Moon in May?
A lot sure has changed in the last decade. Bitcoin went from a new concept to a new asset class in a period of ten short years. It went from financing shady purchases on the Silk Road and being a novelty to an asset that is actively traded on the crypto exchanges that it inspired. You can even read about Bitcoin in the pages of Forbes magazine.
A part of the Bitcoin mystique is that it depends on something known as a blockchain. Oh, you have heard of blockchains? You can thank Bitcoin for that, too.What some people don’t know is that blockchains have to be maintained by a group of individuals (or companies) called miners. Miners are the ones that help to verify transactions on the Bitcoin blockchain. In exchange they receive an award for the work they perform. The reward is newly minted Bitcoin tokens.
In May of 2020 an event called a Bitcoin halving is going to take place. When this happens the reward that miners receive is cut in half. Bitcoin halvings occur at scheduled intervals.
Something else also happens when a Bitcoin halving takes place. The value of Bitcoin is affected. Because of this the months leading up to a Bitcoin halving can be frenetic. Everyone is trying to guess the way that Bitcoin will react to the halving. There is money to be made or lost, and investors don’t want to be on the wrong side of the line when the halving happens.
The Number Everyone is Dreaming About
Were you involved with Bitcoin back in 2017? You remember those last days of the year when Bitcoin made it up to that level everyone was talking about. $20,000. People were getting rich. Some were going to be millionaires. They were talking and dreaming about $20,000 and then it became a reality. Then the bottom fell out and people lost money. Here we are in 2020 with Bitcoin struggling to hit and maintain $10,000.
Today there is a new number. That number is $100,000. Believe it or not there are multiple analysts who believe a $100,000 Bitcoin is a possibility. Some of them believe that the key to achieving that number is the Bitcoin halving. They believe the halving is just what Bitcoin needs to send it to the moon.
It all sounds a little bit like Bitcoin space exploration, right? Bitcoin has already been to the moon and fallen back to earth. But, the analysts may be onto something. The moonshot in 2017 happened after a Bitcoin halving in July 2016. So, there is some precedent for an increase in value once a halving occurs. But it took another year for the big bull market to materialize after the last halving. The same could happen this time, or it could take longer. No one really seems to agree.
If Bitcoin Moons in May What Happens to the Crypto Market?
Bitcoin is only now moving into its second decade of existence. Most cryptocurrencies have not even reached an age of ten. Market data can be used to create technical analysis tools which can give us a picture of what might happen in May, but there is a problem. Bitcoin and the crypto market are simply too young for technical indicators to offer an accurate predection.
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Consider this. Stock traders use technical indicators all the time to examine stocks and make speculations about where a stock is headed. They have access to years and years of data that can be used to create charts. Even with all of this information they can still get it wrong, and they do. Most of the time.
The more data that can be analyzed, the more accurate the chart. This is a fact. Perhaps after ten Bitcoin halvings we would have something that could predict the reaction with mild accuracy, but we don’t even have half of that. In the case of Bitcoin we won’t ever reach that point for having data, either. By then Bitcoin will have reached its maxmum number of tokens.
The point in all of this is that it is very hard to predict how a halving will affect the market. What we can say is that as Bitcoin goes, so goes the market. This means that many tokens will take a similar track as Bitcoin, whatever that track may be.
The next few months will be interesting, and so will the final months of the year if crypto history does choose to repeat itself.