Within the last decade, Bitcoin and other cryptocurrencies have been perhaps the craziest phenomenon in the world of finance. Bitcoin started off with humble beginnings after the financial crash of 2008. Its price was a few dollars a pop back then as many didn’t really know what to do with the currency rather than spend it on pizza. As much as 10000 bitcoin were required back then for one pizza, amounting to about $600 million in today’s prices. So much has changed, but as the currency enters its third epoch, noticeable price trends can be observed that may indicate how the currency fairs for the foreseeable future.
How are Currencies Regulated?
Ever wondered why you can’t just flood a market with currency as a way to combat poverty among your country’s citizens? Finance experts will tell you that the currency loses its value, but what does that mean? In essence, it means that if more currency comes into circulation, people’s buying power will increase, leading to more demand for products in the market. As a result, the market inflates its prices, knowing well that even higher prices can not deter people from buying. This leads to hyperinflation, a phenomenon previously seen in Zimbabwe. Similarly, Brexit Trader Site also comes into circulation as a reward when miners maintain the blockchain. However, the reward they receive is governed by halving as a means to control the circulation of Bitcoin. This is different from how fiat currencies are regulated, as there is no central entity controlling Bitcoin.
What are Bitcoin Halvings?
The price of any currency, including Bitcoin, is determined by the market interest in trading it. Bitcoin circulation depends on a number of factors, but the main goal of the blockchain is to make it such that a reward is released after every ten minutes when a transaction block is added to the blockchain. However, Bitcoin does not have an infinite supply. Only 21 million are ever to be released, and as of now, around 18.5 million have been already mined. The way it works is that every 4 years, the reward for mining a Bitcoin is halved. Back in 2009, it was 50 Bitcoins. Since we’ve entered the 4th halving event, the reward has been halved by 4 times to 6.25 Bitcoins. This enables a steady supply of Bitcoin in the market so that it doesn’t get flooded too quickly, preventing sudden dips in its value.
What Pattern to Look Out For?
Since the start of Bitcoin, many have noticed the volatile nature of the currency, with prices swinging dramatically over the course of a few days. However, if you look at Bitcoin prices over a 4 year period, you’ll see a noticeable trend.
At the start of this 4 year period, the price of Bitcoin increases steadily. It isn’t until the start of the second year of the halving period that the price of Bitcoin shoots to its highest value. The price then decreases steadily during that year, reaching about a 4th of its peak value. During the third and start of the 4th year since the halving, the price steadily rises and plateaus to a value half of the peak value. And the cycle continues in the next halving. There seems to be a relationship between the peak values between halving events. The first peak neared $25, the next $1000, and the most recent one reached almost $20,000. We can see that the factor between decreased by half as well, from 40 between the first two to 20 between the latest ones. Judging from these, the peak value of the current epoch should be a multiple of ten of the last epoch’s peak value. Meaning, we can expect bitcoin’s value to reach up to $200,000 towards the end of this year and the start of the next one.