05.05.2020 – Special Report. BTC has almost doubled since the corona crash in March. No wonder: Halving is coming soon. The community is betting on big profits. And the Bitcoin disciples are firing up the course with fantastic price targets. Get in or not? We shed light on the background.
Halving probably in a week
It can happen that fast: The most popular and oldest cyber currency is heading for the $10,000. The reason for the new interest is the upcoming Bitcoin halving. The “BTC-Echo” commented, the third halving also awakens new interest in the e-currency. After the two previous splits, the prices had risen further. It is still not quite clear when exactly the halving will happen, since the amount of Bitcoins depends on the miners. “The shareholder” explained that the date for this is probably May 12.
Price target of $300,000 at BTC
And what a coincidence: right now the disciples are cheering the buying frenzy in the congregation. Finanzen.net, for example, recently let Preston Pysh have his say. Pysh is the founder of BuffetsBooks.com and the Pylon Holding Company and has built up a large following in the social media. And he sees a long-term price target for BTC of up to $300,000 – with fluctuations in between. By the next Halving in four years, Bitcoin will be between 80,000 and 100,000 US dollars.
Push through halving, inflation and new acceptance
In any case, Pysh considers the current halving to be a massive price driver. Another argument is the weakness of the greenback he sees. He referred to the trillion-dollar aid campaigns in the USA in the fight against Corona. Furthermore, he expects a growing acceptance in the mainstream due to inflation worries.
We add: The issue of inflation protection cannot be dismissed – this is exactly why gold is in demand. Investors worldwide are longing for an asset whose intrinsic value cannot be eroded by monetary policy. However, the question arises whether – apart from the gambling community – criminals are currently investing in cyber-currencies, as they want to avoid the surveillance of commercial banks. Moreover, the world’s central banks could at some point eliminate the uncontrollable, annoying rival in the currency world.
Harder than gold – BayernLB sees USD 90,000
But Bayerische Landesbank also caused a sensation last September with an extremely bullish analysis. The bank examined the so-called stock-to-flow rate of Bitcoin in comparison to that of gold. This SF rate is the “hardness” of an asset. According to this, there is a limited supply of gold, which is increasing only slowly. To the currently known 187,000 tons of gold worldwide, about 3,000 tons per year would be added. The ratio of the gold stock (stock) to the growth quantity (flow) is thus about 1.5 percent. After the current third halving, this rate will be much lower for Bitcoin than for gold. This means: “Bitcoin could become harder than gold.” For this year, the bankers saw a price of $90,000.
And BayernLB added that the next halving would be in 2024. Then the hardness level would double again. In their study, however, the analysts qualified that even the best statistical models can fail in their forecasts. Therefore, the current Bitcoin halving will be an endurance test for the stock-to-flow model.
This is what halving is all about
The fact is that the upward volume growth of Bitcoin is slowed down every four years until it reaches zero. The “BTC-Echo” explained exactly what “halving” is all about: The Bitcoin block chain is a kind of database that, very simplified, can be thought of as an Excel file with many pages. This table stores information about transactions with the Bitcoin, such as when a certain number of transactions are transferred from A to B.
To update this information in the Bitcoin block chain, which runs on thousands of computers worldwide, and to encrypt its contents in an unmanipulable way, these computers use complicated mathematical formulas. The operators of the Bitcoin block chain’s IT networks receive a reward for this work. Once they have calculated a block and cryptographically encrypted it, newly created BTCs are distributed to them. Exactly this amount is halved from 12.5 BTC to 6.25 BTC.
Half reward for the same work
It is therefore not the number of Bitcoin that is halved, but the wages paid to the “miners” for the creation of new BTCs. Just as much work, half the profit = decreasing incentive, reduced production, less strongly increasing supply. Currently there are about 19 million BTC. This number will rise more slowly after the halving, judged “BTC-Echo”. And thus, theoretically, stable or growing demand with a slower growing supply could theoretically lead to rising prices.
Final cap at BTC 21 million
And there is another potentially bullish fact about supply. “Computerbild” added that Bitcoin inventor Satoshi Nakamoto had set the maximum number of coins in development at 21 million units. No matter how hard Miner tries, it doesn’t go beyond that amount. In order to delay reaching the maximum number of coins as long as possible, the so-called “halving” takes place every four years.
Our conclusion: The BTC bulls currently have some arguments on their side. The interest is growing. Bitcoin could theoretically become as attractive as gold, which has no use whatsoever apart from its function as jewellery and yet has been in demand for thousands of years. However, the fact that an uncontrollable secondary currency is a thorn in the side of politics is a major problem for BTC.
The Bernstein Bank wishes you successful trades and investments!
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