Bitcoin halves for the third time

Bitcoin ushered in the third halving. On May 12, Beijing time, as the 630,000th block was mined, the Bitcoin block reward was reduced from 12.5 BTC (Bitcoin) to 6.25 BTC.

Since 2012, the Bitcoin block reward has been halved from the original 50 BTC to 6.25 BTC three times. Unlike the previous two halvings, Bitcoin prices fluctuated sharply on the eve of the third halving. Wind Bitcoin to US dollar (GDAX) data shows that the bitcoin price surpassed 10,000 US dollars again on May 7, and then experienced four consecutive declines. On May 10, it fell by 8.42% in one day.

On May 12, the third official halving of Bitcoin did not bring about the market’s expected bull market. It closed at 8821.43 US dollars that day, up 2.9%. As of 7:55 on May 15th, Beijing time, the bitcoin price once again hovered at the $ 10,000 mark, reported at $ 9799.99.

Regarding the volatility before the halving, many industry insiders said in an interview that the main reason is that the expectation of halving of BTC was fulfilled in advance. Unstable. ” However, the halving of Bitcoin will inevitably bring about a rise in the price of the currency. From the perspective of the market after the previous two halvings, the third halving may lead to a bull market one year later.

Gao Chengshi, a member of the Blockchain Professional Committee of the Chinese Computer Society (CCF), believes that due to the absence of credit support and price support for Bitcoin, the game between various institutions will make Bitcoin prices in a long-term shock.

1. Bitcoin halved three times

The so-called “halving” is a unique issuance mechanism of Bitcoin. The Bitcoin white paper released by Satoshi Nakamoto in late 2008 shows that this mechanism was designed when Bitcoin was born. Bitcoin halving refers to the halving of the rewards obtained after the production of new blocks every four years.

According to the Bitcoin white paper, the total amount of Bitcoin is 21 million. The initial “mining” of a Bitcoin block rewards 50 Bitcoins. For every 210,000 blocks mined (about 4 years), the reward is reduced by half. Information on the BTC.com website shows that on January 9, 2009, the first bitcoin block in history was dug out, and the reward was 50 bitcoins.

On November 28, 2012, the 210,000th bitcoin block was dug out, and Bitcoin opened its first reward halving, from 50 BTC to 25 BTC;

On July 10, 2016, after the 420,000th block was dug out, Bitcoin opened the second reward halving, the reward was halved from 25 BTC to 12.5 BTC;

On May 12, 2020, as the 630,000th block was dug, Bitcoin officially ushered in the third official halving, and the reward was halved from 12.5 BTC to 6.25 BTC.

In view of the fact that the price of Bitcoin has soared after the first two halvings, the third halving market is also expected to usher in a big bull market. However, from the data of the day of halving, the price of Bitcoin has not increased significantly. Wind Bitcoin to US dollar (GDAX) data shows that it closed at 8821.43 US dollars on May 12, a slight increase of 2.9%.

Gao Chengshi pointed out to the reporter of International Finance News that the environment in which Bitcoin halved for the third time was completely different from the previous two. Institutions that want to enter the Bitcoin trading market have already entered, so there will not be more fresh blood in the short term.

Li Feng, head of the Baidu blockchain, told the reporter of International Finance News that Bitcoin is in an incomplete digital currency market, and its price (especially the short-term price) cannot be reasoned and judged from the perspective of the usual financial market. Bitcoin’s influence and audience are now wider. In an incomplete market, as participation and attention increase, uncertainty also increases.

In an interview with the International Finance News, Lily Mu, the co-founder of Baker Chain, also said that the first two halvings had a lot of new funds to enter the market, but since 2018, the number of BTC active users has not been obvious increase. BTC halved the miners for the third time and suffered a heavy blow. “When new funds have not entered the market in large numbers and miners’ income has been halved at the same time, there will eventually be a global chain reaction.”

2. Being “blood washed” on the eve of halving

The third halving not only ushered in a bull market that was not expected by the market, but on the eve of the halving, there was a miserable situation where the price of Bitcoin dropped by $ 1,000 in half an hour, and tens of thousands of bullish investors burst. Wind Bitcoin to US dollar (GDAX) data shows that after the Bitcoin price surpassed the 10,000 US dollar mark again on May 7, it experienced four consecutive declines. On May 10, it fell 8.42% in one day.

Coin Market Cap data shows that since 8:00 on May 10, the bitcoin price fell sharply, falling by 15% within one hour, and once fell to $ 8,200. Bitcoin’s decline brought a transmission effect. As of 17:00 on May 11, the total market value of virtual currencies shrank to 236.9 billion US dollars. Ethereum (ETH) reported $ 186, a daily decline of 2.27%; Bitcoin Cash (BCH) reported $ 229, a daily decline of 3.16%; Litecoin (LTC) reported $ 41, a daily decline of 2.7%.

In this round of bitcoin price plunge, in addition to the loss of currency holders, users participating in virtual currency contract transactions also suffered heavy losses. According to the statistics of the virtual currency data platform, as of the evening of May 10, a total of 42,000 people had liquidated positions in 24 hours, and the amount of liquidated positions reached 834 million US dollars, equivalent to nearly 6 billion yuan. By 17:00 on May 11, 12,302 people still broke positions within 24 hours, and the total amount of liquidation was about 950 million yuan.

Mou Xiaoling bluntly said, “The reason for the liquidation is very simple, that is, the expectation of BTC halving was fulfilled in advance. The BTC’s surge in the previous week and the recent plunge are actually true reflections of this anxiety. Time node, think it can profit from it. ”

Liu Feng, director of the Blockchain Technology Research and Application Research Center of the School of Artificial Intelligence Reform and Management at Shanghai University of International Business and Economics, analyzed the reporter of International Finance News that by analyzing historical data, the currency price fluctuated violently for a period of time before and after halving. , And after a large probability of halving, there are several rounds of plunge. The reason is that the expectation of a halving of Bitcoin’s skyrocketing is consumed by the market, so it cannot be said that the halving of the bull market is coming immediately. The virtual currency market is volatile and risky, and investment needs to be cautious.

Li Feng pointed out that anything that is too free, secretly concentrated, unregulated, and easily manipulated can happen. In addition, the bitcoin market is also affected by the connection between the epidemic and the real world, and at the same time it can be expected to be halved, some of which have already been cashed out.

Wang Yuehua, a partner of Deding Innovation Fund, told the reporter of the International Finance News that the halving of Bitcoin on the one hand makes it more difficult to “mine”, on the other hand, the halving of incentives will directly affect the miners. The biggest cost of miners is Electricity costs, with constant costs, reduced revenue (with constant bitcoin prices) means that some miners must sell more bitcoins in the market to pay for costs, which leads to the market having to bear more Pressure “.

3. Is the “bull market” yet to come?

Historically, bitcoin has halved twice, causing the currency price to soar from a few dollars to thousands or even tens of thousands of dollars. Historical data shows that there will be a big bull market from half a year to about a year after the first two halvings.

Gao Chengshi analysis said that when the Bitcoin block reward was halved for the first time on November 28, 2012, the price of Bitcoin was $ 12.6 per piece, and the price of Bitcoin rose steadily in the following year. On December 5, 2013, the bitcoin price once rose to $ 1127.12 / piece. However, from 2014 to 2015, the bitcoin price began to fluctuate and fell from a high of $ 975.83 / piece on January 6, 2014 to $ 221.51 / piece on August 28, 2015.

The price of Bitcoin at the second halving was about $ 650 / piece. More than a month before the halving, the price of Bitcoin was in a general upward trend, from 450.02 USD / piece on May 26, 2016 to 653.69 USD at the second halving, an increase of 45.3%.

In the year after the second halving of Bitcoin, the price of Bitcoin began to climb straight up. On December 29, 2017, the price of Bitcoin was as high as 19,666 US dollars / piece. But then, the price of Bitcoin began to plummet, and on February 28, 2018, Bitcoin closed at 10314.9 US dollars / piece. As of December 31, 2018, the bitcoin price fell to 3122.3 US dollars / piece, which was 84% ​​lower than the 2017 high of 19666 US dollars.

Wang Yuehua pointed out that if the sell-off in the market is exhausted, under the buying expectations of institutional investors, the miners who have the strength to survive in the market will start to adjust the currency and reduce the selling pressure, which will further increase the price of Bitcoin. According to the price analysis of the previous two halvings, the price of bitcoin will rise about a year after the halving (general miners cost recovery is 6 to 8 months).

However, Gao Chengshi said that from the perspective of supply and demand, the price of Bitcoin will go down, but considering the cost of mining, the price of Bitcoin may rise. Based on the above judgment, Gao Chengshi predicts that the high probability of Bitcoin price in 2020 will still fluctuate within a certain range.

From a long-term perspective, Gao Chengshi is not optimistic about bitcoin. He believes that the virtual currency represented by bitcoin has no corresponding letter to rely on, the price is traded, and is affected by various factors. , More market manipulation power. “As the credit of sovereign currencies of various countries is further strengthened, including the introduction of digital currencies of central banks of various countries, the living space of pure virtual digital currencies such as Bitcoin will become smaller and smaller.”

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