By holding, we don't mean just part of a portfolio as a long-term investment (although this is a good time to keep it there as well). We mean active traders buying and selling daily/weekly/monthly.

Starting in June or whenever the price is down (like now), a solid strategy on a path for success would be to buy through mid-July and then a continued slow buy to hold into August, possibly as late as September 1st or beyond before any profit taking.

Why? Simple. The price is going to go up.

There is certainly no guarantee and this is no such offer of warranty or admittance of any insider knowledge. In fact this entire forecast is nothing more than a guess. However a well educated guess and that has nothing to do with College study. There are certainly some indicators investors and traders should be paying attention to.

Will we see the moon in 2016? Likely not. We might see the price as much as double however. We guess that'll be more of a 30% or better increase.

The Hell You Say!

The hell I do! Here's why.

There are four major things happening right now that will affect the price in a way.

First of all we have the block size debate which is slowly but surely simmering down and getting closer to a consensus. This is a given to come to fruition and once it does the price will reflect favorably. 

Secondly we have the blockchain bandwagon. These are the 500 banks and their money along with the startups taking their money and adding more banks to make a bank-built-something they are going to call a bank block-chain that instead of actually being a blockchain and providing a decentralized trust, will rely on the same agreements that don't work today. 

This will unlikely be a major factor on the price but it may influence it a bit as these systems begin to fade into the background or outright fail as the bandwagon realizes they were actually partially right the first time when they threw a bunch of money at bitcoin. Some might even work out, but a new respect for the blockchain will be accompanied for sure.

Third we have the flip side of that. Sidechain technology. This is already showing signs of possible production soon by a few companies who have been working this for some time now. This is not new by any means, it was just not widely advertised and still isn't actually, as the blockchain bandwagon is being and the bitcoin badwagon was before that. Overstock, Blockstream, Rootstock, and many others are working on blockchain sidchains. As these come online, this will further solidify bitcoin's place as a commodity.

Fourth and most important, none of the above or all combined will likely have the affect on the price in the future as the last item does on our list. 

...the block reward halving

Block Halving Explained 

What's that you ask? I'll tell you. Miners are awarded 25 bitcoins for each block of transaction they process on top of the transaction fees they earn. This is currently the main revenue stream for most mining companies and individuals.  This amount was once 50 bitcoins up until the first halving in [2012]¹

The next halving will cut that down to 12.5 and then 6.25 and so one before the entire supply of bitcoin has been mined in its entirety. There will only be 21 million total complete bitcoins ever which may not seem like enough but considering Satoshi's to the eighth place 0.00000001; if one Satoshi was worth $1 USD that would equate to $210 Trillion USD. About 4 times the total amount of money on earth currently (roughly about $60 Trillion), thus its not only plenty, there's room for much growth in the global economy.

Over time as the block reward decrease, usage and adoption increases. In the past few years transactions involving bitcoin (each of which costs a small fee)  has doubled each year. The theory is that as fees increase and reward decrease, things will pretty much even out so that miners can still survive and the rest of the world can still enjoy the blockchain. This has worked out to date however this will be a much bigger halving than the last. There are far more adoption thus more fees these days, when the 50 to 25 half took place there were almost no fees being paid.



There's also allot more power, lower electricity, and professional operations. Back when 50 became 25 you could mine on a single CPU and make a dent. However, all the power in the world isn't going to double overnight, and the block reward is going to halve while the difficulty will have already gone up.


Halving through 2021


That means there are going to be half the bitcoins produced per day than are produced now. 

All at once. It's the band-aide ripped right off in one sweep approach. It's going to sting, but not at first. There's going to be a shortage, but not at first. It's going to work kind of like a grenade. All of the expectation without the boom. Until the boom.

There will be more demand with half the supply (being produced daily) ¹

That may get interesting. Currently there are about 3650 bitcoin produced every day. That will be reduced to 1825 literally overnight. Considering there are about 250,000 transacted each day and about 5MM to 15MM USD worth traded. That leaves little room for sluggish production.

The issue won't be getting any better either. The difficulty will continue to rise and the reward will split about every 4 years. 

Update 3/25/2016: The halving continues through 2024 halving to 0. ² Also note that the graph above charts only through 2021 however the halving continues to the estimated date of 2140. 1st half was in 2012 (not 2011).¹

The last block mined will be block #6,929,999 in 2140. Whereas its theoretically possible given medical breakthroughs that have yet to break through, it's unlikely any of us will still be alive. Essentially, the last bitcoin will be mine with a completely different set of humans on earth than are here right now.

Given that length of time and steady block rewards, it'll be easier to adjust than will the next year followed by the next 5.

When Does This Happen?

In July of this year. 2016. We have a countdown widget (now located under pricing and also available on the widgets page) you can visit anytime or install on your webpage for an estimate.

Currently the estimated date is July 12th, 2016. The will be plus or minus a few days/hours. However its unlikely to see a mass panic on this day. There will still be quite a few residual bitcoins around. As this sets in however, this is likely to cause an increase of some sort in bitcoin price.

Get it while its cheap.

Estimate: Significant (30% or better) increase in value by September 2016.







Story by dinbits
image by dinbits staff


Edits (Special thanks to ismith and benperrin117):
1. 2012 was corrected, "half the supply" was amended to specify daily production. Both noted by ismith
2. Halving continues to 2140.Noted by benperrin117.

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Post a Comment

  1. Conventional wisdom is that the halving is already priced in, and I believe it is.

    ReplyDelete
    Replies
    1. What the hell does that mean? That doesn't make much sense.

      Delete
  2. Good article. Very informative.

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