You’ve probably seen a few stories online saying Bitcoin Halving 2020 will make you rich, thanks to something called the “halvening”. The logic goes that, since the Bitcoin mining block reward halves every four years or so, the price will rise to compensate. While the two previous halvenings (or “halvings”) saw massive bull runs a year or more later, 2020 is a more complicated picture. Let’s explain why it’s important to understand all the issues, including those unique to this year.

Some background

We touched on the Bitcoin halvening (or halvenings if you include BTC and BCH in the mix) in our “Why 2020 will be Bitcoin’s Most Important Year” article in December. There’s good background in there, but to summarize: there are now three chains calling themselves “Bitcoin” in 2020; the three chains will halve at different times; and the timing of those halvings could matter. Or nothing may happen at all.

Bitcoin originally rewarded miners with 50 new coins every time they confirmed a block. The protocol rule regarding block rewards remains on the same logarithmic schedule—it halves every 210,000 blocks, or around every four years. The next Bitcoin halving event is due around April-May 2020.

The self-fulfilling prophecy

One argument you’ll hear in favor of going all-in before a halvening is that it’s a self-fulfilling prophecy. The curious and eager will be excited by reports of historic gains that followed previous halvings, and stock up—therefore increasing demand for coins, and their prices.

This is what services that profit from trading (and large holders whose portfolios would rise) want you to believe, so remember that. You’ll see similar attempts at hype before hard forks, whether they carry the potential for free forked assets or not.

It could also come true, if enough are convinced. The halvening is getting a lot more attention this time, often from commentators who haven’t followed Bitcoin much and are missing some of the issues.

Here are a few important things to remember, though. The two previous halvenings happened in 2012 and 2016. The circumstances surrounding the Bitcoin ecosystem was radically different in each case—in 2012 it was still relatively unknown, and in 2016 there was still only one Bitcoin blockchain (there still is, but to keep this article useful we need to look at the pretenders too, since others aren’t).

Bull runs did follow those events. However the big gains in both those cases came over a year after the halvening happened. Anyone expecting immediate results from 2020’s halvening/s could be disappointed, even if history repeats perfectly. This could discourage newer and more impatient buyers who know little about Bitcoin other than “I knew a guy who made millions”. Since the name “Bitcoin” is pretty mainstream nowadays, there are more of those newcomers around, too.

Bitcoin in 2020 is not the same as 2012 or 2016

BTC Core (BTC) and cryptocurrencies in general got a lot of press between 2012 and 2016. By 2016, many businesses were accepting Bitcoin payments and hundreds of other blockchain asset projects had appeared. Two assets that possibly aided the 2017 bull run—Ethereum and Tether—did not exist in 2012.

Since then, BTC’s appeal as a payment system, or a new money to replace fiat currencies, has soured. At least, it hasn’t grown in proportion to the attention it has received. High fees led to low consumer demand, and a “HODL” mentality has left most users leaving their BTC bags untouched for fear of losing out should the next bull run start tomorrow. Many mainstream consumers remain unaware that BCH exists, or is something different. The same goes, for BSV, at least for now. Adoption of BTC’s “solution” to the payments/fees problem, the separate Lightning Network, hasn’t spread beyond Core enthusiasts.

So the excitement this time around (for BTC) isn’t that the world will suddenly wake up to its claimed economic benefits as money, but that it will increase in value… which is somehow supposed to happen without any real gain in utility.

Miners and profitability on three chains

Now let’s look at the miners, who will play a large role in determining Bitcoin’s value in 2020 and beyond. The obvious immediate impact of a halvening is a halving of profits—they’ll be getting only 6.25 bitcoins from every confirmed block instead of 12.5. History is more relevant in this case, and the previous two halvings did see a drop in hashrate as miners left the network.

Here’s where it starts to get really different—in 2020, miners have at least two more realistic and easy alternatives to mining BTC (or BSV, or BCH). The first major hard fork of the Bitcoin network happened in 2017, producing BTC and BCH. BCH split again in 2018. Bitcoin BSV is the only chain following Satoshi Nakamoto‘s original protocol, but all three chains use the same hashing algorithm. Economically rational miners (i.e. those motivated more by profit than ideology) will often switch between the three chains depending on which is more profitable.

The three networks don’t mine blocks in perfect sync, which means that BCH will halve first (~April 7th), then BSV (~April 8th), then finally BTC (~May 7th). Coin.dance has countdown clocks for each on the same page if you’d like to see updates by the second.

Unless we see drastic price movements before those dates, there’s probably going to be a month where it’s more profitable to mine BTC than BSV or BCH. However, bitcoin mining groups leaving one network for another also makes the lower-hashrate network more profitable, as less energy is required to mine. There will probably be some anomalies, but by mid-late 2020 chain and profitability comparisons could return to their current states.

OK, so what do I need to do?

Our most rational conclusion is: the two previous Bitcoin forks are too different from each other and from 2020 to make a prediction about price or hashrate. Unless you’re a day trader or miner and need to act, it might be better to not expect anything special to happen. And remember, even history shows there weren’t any significant price bumps until long after the previous halving events—so reactions are more of a longer-term picture.

There’s always the potential for a “black swan” event, or a game-changing moment that few saw coming. But as Nassim Taleb says, you can’t predict a specific black swan event, so the best you can do is be prepared for one.

The only financial advice we can give here is to do your research on how Bitcoin works, and know exactly what’s going on before risking any money. Don’t be swindled by over-hyped promises of quick gains (good advice for halvenings, forks, or any other time).

Otherwise, keep calm and carry on. If you must buy in, don’t worry about timing and choose an asset you feel has the best real-world utility given the technological, legal/regulatory and economic environment. Halvenings give hype-mongerers an opportunity to sell you something at specific times, but there are far greater influences on future events.

New to Bitcoin? Check out CoinGeek’s Bitcoin for Beginners section, the ultimate resource guide to learn more about Bitcoin—as originally envisioned by Satoshi Nakamoto—and blockchain.