The Halving, or the “Halvening” – the term used by those who prefer to make it sound like it has horror movie connotations, is imminent, arriving in about a week’s time. What this brought about the last 2 times it happened in 2012 and 2016 was a meteoric rise in the price of bitcoin (going up 10x within 1 year or so after halving), and bitcoin bulls are hoping for another similar situation this time around.
What exactly is this Halving event? Essentially, the Bitcoin software ecosystem makes it such that at every milestone number of blocks mined, the difficulty level increases and the mining rewards half. For example, the current rewards are 12.5 bitcoins per 10 minutes of mining, and around 11 May 2020, the rewards will drop to 6.25 bitcoins every 10 minutes. When this happens, the inefficient and backward mining rigs and farms will go out of business as they cannot keep up with the lower rewards issued by the Bitcoin system, and this causes a drop in supply, which drives up the price of Bitcoins by simple economics of demand and supply. Indeed, the last 2 times halving occurred, the prices of Bitcoin started a long march upwards.
Are there any differences this time round? Yes there are – (1) This is a Covid-19 shaken economy, and Bitcoins and other cryptocurrencies are the best performing asset class in the world right now, with gold in second place. Many writers think that the halving effect has already been priced in for the price of Bitcoins, due to the amazing price performance of Bitcoin despite the world economy tanking. (2) There is massive cheap liquidity available in the market now, and just like in 2017 and early 2018, there are a lot of new buyers of Bittcoins, and the prices of Bitcoins went up in the spot market due to the influx of new buyers – many of whom were possibly buying into Bitcoin with their stimulus monies from governments around the world. (3) There were no strong derivative and futures markets for Bitcoins and other top virtual currencies, but this time round there are a few regulated markets like Bakkt, CME, CBOE, and entities like Bitmex and Binance who are getting into this market segment by applying for similar licences in various jurisdictions around the world.
Therefore it is entirely possible that there will be no great uptick in the prices of Bitcoins after this halving, but this writer personally opines that signs are still pointing towards a similar path as before.
What does this mean for ICO/IEO/ITO’s? With Bitcoin dropping to a market dominance of 30% in early 2018, and with its current market dominance of cryptocurrencies at near 70%, it is very likely that any increases in Bitcoin prices, especially if it goes up 10x like in the previous 2 halvings, will necessarily translate into a similar trend for altcoins and the ICO/IEO/ITO fundraising market. It is therefore very possible that all altcoins will start to experience similar rises in value, as the entire asset classes gets a massive price uplift. Therefore, look for good projects and tokens to invest in, do your due diligence and choose well, and it might be possible to catch the upswing of the entire asset class and industry at the start of a massive bull run!
For more information on how you can navigate the tricky ICO/ITO landscape, Gravitas International is able to provide a full-suite of service for all future token launches.
If you are interested in our very own token offering, AEXON, you may find out more from our website and social handles.