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Bitcoin 2020 Halving Impact Analysis

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Jered Masters
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Bitcoin (BTC) [1] is a decentralised crypto currency where transactions are made by broadcasting the intention to transact to volunteer "miners" around the world. These miners then compete to create a cryptographic signature which proves the transaction (and others) is valid and was initiated by a party in control of the funds. This signature and the transactions are then permanently committed to history on the blockchain. These miners are rewarded for the work of creating the signature with a fixed quantity of Bitcoin, the amount of which halves approximately every four years. This called a "Halving" or "Halvening". The next is predicted to occur in May 2020, and will result in the block reward reducing from 12.5 BTC per block to 6.25 BTC. This could have significant impact on mining profitability, the price of Bitcoin, liquidity and global transaction volume as this event will reduce the global revenue of mining by $7.3M USD (equivalent) per day. Some experts, analysts, and popular commentators speculate this will result in a significant increase in the price of Bitcoin, possibly more than doubling it over 12 months. This could add $146.6B USD equivalent at the current Bitcoin market capitalization. The Bitcoin experiment has thus far been an interesting study into the viability of an unregulated, unbacked currency. The consequences of this Halving are likely to give hints about the long-term future of Bitcoin as this is the first Halving which puts a significant percentage of miners into a non-profitable state. This study explores consequences of the Halving with a methodical approach and draws the conclusion that the price of Bitcoin could decrease in the short-term and increase in the medium-term, although unlikely to the same extent which previous Halvings have seen.