In a little more than 30 days, we are facing an important event: the Bitcoin Halving 2020, which is even more important in view of the current economic situation. While the whole world is talking about unlimited liquidity, helicopter money, brrrr, (hyper-)inflation and consequently an increase in the money supply, the supply of new Bitcoin will soon be halved.

In this article we would like to share the most important facts about Bitcoin Halving 2020. We also want to look at the question of what role scarcity actually plays in times of unlimited liquidity.

The most important facts about Bitcoin Halving in an overview

Before we turn to the aspects of scarcity vs. increasing the money supply, let’s summarize again what you need to know about the term Bitcoin Halving.

every 10 minutes on average a new block is mined

every 210,000 blocks (2,100,000 minutes or 4 years) the so-called Bitcoin Halving takes place

The Block Reward is halved with each halving. This means that 50% less BTC is generated.

With Bitcoin Halving 2020, the Block Reward is halved from 12.5 to 6.25 BTC

The last Bitcoin Halving took place in July 2016

Is the halving already priced in? – The big question

This is a question that many in the community are currently asking themselves. Basically there are two different perspectives on this issue, which we would like to explain briefly:

Perspective 1: The Bitcoin Halving is already priced in. Markets are efficient and information – as soon as it is available – is priced in. Since every market participant is aware of the fact that the halving will take place this May, it has already been priced in. Expectations should therefore not be high and the price is unlikely to move towards or at halving.

Perspective 2: There is a big debate about the impact of Bitcoin halving on the price. So this open debate shows that there is no consensus. This disagreement alone would indicate that the halving is not yet fully priced in. Added to this are the arguments that many investors cannot correctly evaluate the dimension of a halving. In addition, the second group refers to the historical behavior of the Bitcoin price within halving.

Bitcoin Halving: Reduced supply vs. QE

The occasion for this debate was given by Blockstream CEO Adam Back in a series of tweets. In doing so, he referred to the special feature of the current Bitcoin Halving. This comes at a time when the world’s central banks are constantly increasing the money supply in an unprecedented manner. The talk is of so-called quantitative easing.

How quantitative easing works: an explanation

For this purpose, we refer to a definition or statement of the British central bank, Bank of England. It says:

Quantitative Easing is a tool that central banks like us can use to inject money directly into the economy.

Many people wonder how this kind of “injecting money into the economy” actually works. Are new banknotes being printed or is a number simply increased on the computer? – The answer to this question is now available:

Money exists either physically as a banknote or digitally as the money in your account. With quantitative easing we create digital money. We then use it to buy things such as government debt in the form of bonds.

Before we get back to Bitcoin Halving, we need to move on a little bit more on quantitative easing. We should know by now what quantitative easing is and how it works. The question remains open as to what objective is being pursued with it. Here is the answer:

The goal of QE is simple: by creating this ‘new’ money, we aim to boost investment in the economy and therefore the spending of money.

This explanation is quite simple and generic. Explained a little bit more precisely, it looks like this:

Our large volume purchases of government bonds reduce the yields on these securities. This in turn reduces the interest rates on loans in the real economy (e.g. mortgage or business loans), as their rate is usually based on the interest rate on government bonds.

The Bank of England also says that QE helps many financial products and/or equities benefit because more money is available. Now let’s get back to Bitcoin Halving

Bitcoin halving and reduced inflation: quantitative hardening

What the Bank of England initially says sounds predominantly positive. However, it is less concerned with the fact that an increase in the money supply also leads to a strong reduction in purchasing power. This is because the money supply is growing at a significantly higher percentage rate than, for example, the wages and incomes of the broad masses. In other words: the increase in the money supply is not in equilibrium or in a healthy proportion to the actual productivity and performance of a state.

Most people then feel the consequences of such an increase in the form of inflation. Money, which should actually function as a store of value, suddenly loses a lot of purchasing power. Products become more expensive, while wages remain the same. And now we come to Bitcoin Halving.

With Bitcoin Halving, however, inflation is reduced. The supply of ‘fresh’ BTC is halved. Blockstream CEO Adam Back used the term quantitative hardening.

bitcoin halving is "quantitative-hardening"



fiat undergoing lots of politically driven quantitative easing.



bitcoin supply algorithm starts quantitative hardening next month.



(@pwuille quantitative hardening pun in bitcoincorrr rebrand joke. I like quantitative hardening!) — Adam Back (@adam3us) April 2, 2020

With this tweet, Back highlights one of Bitcoin’s greatest strengths: its scarcity. While the entire world is printing money on the fly and has unlimited liquidity, Bitcoin is limited to 21,000,000 BTC. This is a fact that no central bank or government in the world can influence.

So if you hear again in the next days and weeks that ‘the money seems to be growing on the trees’ and the FED is once again pumping several trillions into the market, know that Bitcoin will never let you down on this point.