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Bitcoin’s historic halving event on Monday has been widely anticipated in the cryptocurrency market, but what will it do to the Bitcoin price?

The world’s supply of Bitcoin was forever slashed on Monday. The highly anticipated halving event, occurring only every four years, means that less and less Bitcoin – which is limited to 21 million units – will now been mined. By the common measure of pricing dynamics, this must mean that we will see the price driven upwards as supply is gradually reduced.

Monday’s was only the third ever halving. In 2012, the number of new Bitcoins issued every 10 minutes fell from 50 to 25. In 2016, it went down from 25 to 12.5. Now, in the 2020 halving, it will drop from 12.5 to 6.25. The halving happened on block 630,000.

The historic Bitcoin halving event has demonstrated in two ways that digital assets are going to be taken more seriously. First, the price had been rising steadily ahead of the highly anticipated event – almost three-fold in the last three months – and then dropped back just before and after it took place. Having hit $10,000 on 7 May, it has since ebbed to trade at $8917 at time of writing.

Bitcoin is seeing more retail demand again

This shows that there has been increasing retail demand for Bitcoin as investors see and understand the growing influence and huge opportunities of digital currencies in an increasingly tech-driven world.

With this in mind, large cryptocurrency investors, known as ‘whales’, have been accumulating crypto at much lower prices and have started a sell-off to capitalise on this sustained growing demand.

History teaches us that after this post-halving drop in price, there is a subsequent bull run. Previous Bitcoin halving events have prompted impressive price climbs. The 2016 halving triggered a 300% jump in the value of Bitcoin.

There is no obvious reason to believe this time the market will not respond with a longer-term upward trajectory. Indeed, the rally which is likely on its way could potentially be even more dramatic because there is more mass awareness than ever before of the long-term use of and need for digital currencies.

Will central bank printing push BTC price?

In these unusual times, central banks have increased monetary supply and this will further drive prices of cryptocurrencies such as Bitcoin. There has been speculation that Bitcoin could rival gold as a safe haven, although both saw a sell off in March as the coronavirus started to grip Europe and North America.

Traditional currencies are devalued and inflation fears rise on the back of the mass printing of money, the likes of which we have recently seen in the U.S., where the nation’s central bank has added trillions of dollars to the money supply.

Such measures will inevitably encourage even more investors to consider decentralised, non-sovereign digital currencies. Looking ahead beyond the halving event, cryptocurrencies are increasingly becoming regarded as the future of money due to the real-world issues they address and growing mass adoption.

Investors are warned, however, that there are still many pitfalls when it comes to investing in cryptocurrencies. Product providers are working hard to develop less risky means of entering the market – and easier ways to get out of it when the price falls. The market infrastructure also remains untested in some quarters.

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Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Stuart Fieldhouse

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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