Author Topic: What will happen when bitcoins reward halves to 12.5 BTC?  (Read 18890 times)

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Offline cylonmaker2053

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I think the impact on the bitcoin price is not easily predictable.

At least in theory, a known event should not have an abrupt impact on the bitcoin price at that time, because all parties (bitcoin market participants and miners) reflect that information in advance when weighing up the economics of their current decisions. There may be an action required at that point (such as miners turning off equipment), but, again in theory, the potential for all those actions and their consequences should be built into the current price in a fully informed market. In fact the entire future schedule of reward reductions should, in principle, already be built into the market's valuation of bitcoin in this way.

That means that any resulting movements that do occur at such times are not directly from the event itself, but from endogenous market reactions as talk of the event becomes elevated and market participants try to collectively trade off the sentiments of all other players and less informed participants. This endogenous action may (or may not) trigger some increased volatility around the event, but, again in theory if the market were efficient (a big "if") at pricing in the events, it would not be possible to profitably predict the price reaction one way or the other.

Having said all that, the bitcoin market is very immature, so in practice it may be possible to speculate on whether the market is actually pricing in the event efficiently or not.

i agree completely that if the BTC market were perfectly efficient, then the reward halving should have no effect as it would already be anticipated by market participants. since we're so far from anything close to an efficient market in BTC, who knows...

Offline starspirit

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I think the impact on the bitcoin price is not easily predictable.

At least in theory, a known event should not have an abrupt impact on the bitcoin price at that time, because all parties (bitcoin market participants and miners) reflect that information in advance when weighing up the economics of their current decisions. There may be an action required at that point (such as miners turning off equipment), but, again in theory, the potential for all those actions and their consequences should be built into the current price in a fully informed market. In fact the entire future schedule of reward reductions should, in principle, already be built into the market's valuation of bitcoin in this way.

That means that any resulting movements that do occur at such times are not directly from the event itself, but from endogenous market reactions as talk of the event becomes elevated and market participants try to collectively trade off the sentiments of all other players and less informed participants. This endogenous action may (or may not) trigger some increased volatility around the event, but, again in theory if the market were efficient (a big "if") at pricing in the events, it would not be possible to profitably predict the price reaction one way or the other.

Having said all that, the bitcoin market is very immature, so in practice it may be possible to speculate on whether the market is actually pricing in the event efficiently or not.

Offline cylonmaker2053

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Hi Guys, Just thought i would throw in a comment from a few conversation i had over the last couple of months;
I know a guy involved in a large mining operation in china (3 warehouses filled with custom built 16nm miners - shhhh apparently anything under 20nm is illegal in china...(military spec)) and he has suggested to me once before that they are profitable <$100USD p/btc at current block reward.
##i deleted all the details as they are a bit fuzzy in my mind and did not want to speculate or spread misinformation. i will say they are not on your everyday power deal and are looking to expand x3.
i will most likely see this guy this week so will clarify the details further and pull out a calculator to check some figures and repost if people are still interested.

I have no reason the doubt this fellow and the way he conducts himself it seems as though mining profits especially for their group are anything but thin.

any price movement, but up, will likely flush out the uncompetitive miners and move more share of business to these kinds of outfits. thanks for sharing!

Offline GChicken

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Hi Guys, Just thought i would throw in a comment from a few conversation i had over the last couple of months;
I know a guy involved in a large mining operation in china (3 warehouses filled with custom built 16nm miners - shhhh apparently anything under 20nm is illegal in china...(military spec)) and he has suggested to me once before that they are profitable <$100USD p/btc at current block reward.
##i deleted all the details as they are a bit fuzzy in my mind and did not want to speculate or spread misinformation. i will say they are not on your everyday power deal and are looking to expand x3.
i will most likely see this guy this week so will clarify the details further and pull out a calculator to check some figures and repost if people are still interested.

I have no reason the doubt this fellow and the way he conducts himself it seems as though mining profits especially for their group are anything but thin.

Offline cylonmaker2053

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Prices will quadruple..invisible hands at work

one would hope, but there's no guarantee. if prices end up falling, we'll see plenty of miners going out of business and in some way PoW security degrading.

Offline jsidhu

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Prices will quadruple..invisible hands at work
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Offline sudo

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Offline Empirical1.2

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The Litecoin reward will halve in 53 days http://www.litecoinblockhalf.com/

I think it has circa 30% inflation at the moment. So it requires $4 million of new money coming in every month to sustain it's price which it couldn't in the bear market and steadily declined and was close to dying.

Fortuitously for Litecoin, the crypto-currency competitor that was coming up to destroy it, BitSharesX is no more. So it is still the second largest true crypto-currency by a wide margin and enjoys popularity in both East and West. Given the Chinese stock markets recent turmoil and Greece's problems & knock-on effects, it's looking possible that it could see a strong increase in volume from both sides at a time when it's expenses will soon be halved.

Also unlike BTC which is used for purchases, resulting in retailers selling immediately for fiat and creating downward price pressure, the extra step involved in spending LTC as easily could work in it's favour in this regard too.

So it will be interesting to see how the reward halving combined with current events play out.
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Anyone looking to spend real money on increasing mining supply is aware of the halving and will not be adding to this supply knowing its not profitable.  This should mean a tailing off of production some time prior to the event.  Difficulty then, should decline for a time until it meets an upward post-gap trend of the latest designed efficiency that makes sense with the new reward.     

This assumes a stable price and conservative improvements in technology.  A rising price would obviously smooth the transition and I think halving inflation should decrease the overall sell pressure via fewer miners selling to pay electric companies.  Halving the expenses we're paying for security should make bitcoin a more profitable/less wasteful coin.


Offline speedy

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Markets have already discounted the halfing... Price won't double because of the halfing, i will guarantee that

If existing traders think that the halving is already priced in and therefore think that the current price is fair value, they think that because the halving will increase the price later and therefore Bitcoin is worth holding onto now for future returns.

Litecoin more than doubled because of its halving. You cant guarantee anything.

Offline lil_jay890

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Markets have already discounted the halfing... Price won't double because of the halfing, i will guarantee that

Offline speedy

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Bumping this very interesting topic, which Ive been thinking about a lot recently. My prediction:

The halving in 12 months will halve downward pressure (obviously) resulting in a probable doubling of the price to ~$500, meaning that mining will be just as profitable as it is now. The predictions of mining chaos are unfounded.

The halving will be great for Bitcoin because just 1.25 new coins every minute at a price of $500 is not a lot of downward pressure - Bitcoin's network effect means that users will be happy to keep buying in at that rate.

$500 / minute is a tiny cost to pay relative to a network with so much attention and demand.

Now that the halving is getting pretty soon, what do we think?


Offline alexkravets

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Reward halving (in USD) defacto happened two times since BTC ATH price.
Also, this time around same thing as last reward halving might happen, simply a temporary fall in difficulty followed by more hashrate coming online to return to previous hashrate, i.e. for two weeks you might get 4.5 to 5 blocks per hour instead of 6.5 on average, that's all.

Offline CLains

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Litecoin will halve in less than six months.. Just sayin.