Bitcoin price prediction 2020
2020 is an important year for Bitcoin, and a lot is bound to happen. One of the most important events is the long-awaited bitcoin block halving that will take place in May 2020. It’s almost certain that the halving will have an impact on the bitcoin price. And when you take that and other upcoming events into consideration, it could well be that 2020 becomes the year in which all records are broken.
Bitcoin block halving
Bitcoins will not be ‘created’ endlessly. A total of 21 million bitcoins will be put into circulation. Actually a little less, to be precise. A total of 20,999,999,9769 bitcoin will be mined in total. These bitcoins are released at a predictable pace through block rewards for miners.
That reward is halved every 210,000 blocks. Since a block is found approximately every ten minutes, you can calculate that it takes four years to mine 210,000 blocks. In the beginning, miners received 50 bitcoin per mined block, four years later the reward was 25 bitcoin, and currently a miner receives 12.5 bitcoin per block. After the bitcoin block halving in May 2020, the reward will consist of 6.25 bitcoin. This way, less and less new bitcoin come on the market and there is a controlled and predictable deflation. Demand for bitcoin is expected to continue to grow, but the supply can’t grow proportionally.
When the halving causes the demand to exceed the supply, the value of bitcoin increases. Now, it has to be said that bitcoin is still relatively young, and the crypto market doesn’t always behave according to what we are used to from traditional financial markets.
It is also interesting to take a look at previous block halvings. Some traders believe that the bitcoin block halving has a direct effect on the price.
In 2012, for example, the first halving took place. A year later, bitcoin reached a provisional all-time high. The same happened in 2017, a year after the 2016 halving.
How is that possible? Currently 1,800 bitcoins are mined every day. The vast majority of those coins are sold directly by miners to cover energy costs for example. When the reward is cut in half, the sales pressure decreases. This could have positive consequences for the price.
Since 2016, the million dollar question has been: Will institutional parties be allowed to offer bitcoin? That they haven’t already certainly isn’t to blame on the institutional parties themselves. There is more than enough enthusiasm from Wall Street and large Asian markets to start trading in cryptocurrency and bitcoin-derived financial products.
In the United States, the main obstructions are regulation, the strictness of the SEC, and obtaining a BitLicense. Every company that wants to trade in crypto in New York (where Wall Street is located) needs a BitLicense, which is a permit granted by the New York State Department of Financial Services. And it is not easy to obtain one.
The role of the SEC is to evaluate requests from institutional parties, for ETFs for example, and to approve or reject them. This process is delayed a lot because the SEC is allowed to postpone their decision several times. This also happened with earlier requests. There are currently three major applications under review. The prediction is that the SEC will rule on these before the end of 2020.
If they all get approved, a lot of money from big investors will go into the cryptomarket and that could drive up the price.
All in all, 2020 will be an important year for the price development of bitcoin. The price found its way back up again in 2019, after some heavy drops in 2018. Will 2020 be another great year?
Warning: this article is not intended as investment advice. No rights can be derived.