3 Scenarios For The Price Of Bitcoin Following Halving

Bitcoin Halving in May 2020 will be only the third of its existence. Since only two Halvings have ever taken place in the history of Bitcoin, it is difficult to draw generalizable lessons.

The two previous Halvings simply allow us to make some assumptions and therefore imagine scenarios about the effect that the third Halving will have on the Bitcoin price.

Here are the 3 possible scenarios:

1. Bitcoin price rises sharply as a result of Halving

This is the most anticipated scenario in the Bitcoin world. With the decrease of the reward for miners from 12.5 BTC per block validated to 6.25 BTC, the creation of new Bitcoins will become scarce.

Some believe that the demand for Bitcoins will increase, which should have a quick impact on the Bitcoin price.

The model put forward to justify this idea is Stock to Flow Ratio which defines a correlation between the production of Bitcoins and the current stock of Bitcoins.

As production of new Bitcoins declines, miners will no longer be able to sell as many Bitcoins to finance their mining activity. As a result, fewer buyers will be able to be served with Bitcoin, which will increase demand.

In this scenario based on the Stock to Flow model, the Bitcoin price would therefore naturally increase following the law of supply and demand.

2. Bitcoin’s price is not affected by Halving

The second possible scenario would be that the price of Bitcoin would not be affected by the Halving of May 2020. Indeed, this Halving has been so much awaited by investors for several months that it could very well have already been taken into account by the market in the current price of Bitcoin.

Moreover, the volume of newly created Bitcoins sold by miners on a daily basis to make their mining activity profitable is ultimately not such a large volume compared to the size of the market.

In fact, the decrease in the reward that is given to miners will not have as great an impact on the price of Bitcoin as some people expect.

Finally, many people believe that there are so many factors influencing the price of Bitcoin that Halving alone will not have as great an impact as some people expect.

3. Bitcoin price drops due to Halving

The latter scenario is the one that very few people imagine in the world of Bitcoin. However, I think it is interesting to consider it. So there is a possibility that the price of Bitcoin will fall as a result of the Halving in May 2020.

A large majority of people strongly believe that the Halving will raise the price of Bitcoin sharply, which leads them to buy a lot of Bitcoins in anticipation of Halving.

As a result of the Bitcoin Halving, if the price doesn’t increase in the proportions they expect, these people may be disappointed and eventually capitulate by selling their Bitcoins.

Such a move could cause the price of Bitcoin to fall.

In such a scenario where the price of Bitcoin falls, miners may no longer be able to make a profit from their mining activity with the reward falling to 6.25 BTC per validated block.

In fact, the miners may not be able to make their computing power available on the Bitcoin Blockchain, which would decrease the available Hash Rate.

This worst case scenario, which would also affect the overall security of Bitcoin, is the least likely in my opinion, but it should be mentioned.