Topic: Can halving the block reward actually reduce the price? (Read 2334 times)

But it's also big part, as most of the miners dump in order to get profit and pay eletricity.

By the time block reward halves we will have gone through quite some more drama and we should be very lucky if it can spike the price back to double digits again.
I doubt there will be any market support though.
Just look at the decreasing volume, its decreasing even faster than the price.

Miners aren't the only ones selling bitcoins. 

IMHO it should double the price as there is only 50% of coins to dump from them.

This is nonsensical thinking.  Eventually, after enough halvings, Bitcoin is either going to be a store of wealth, or it's not.  For it to succeed, it has to be a store of wealth of some kind.  It doesn't matter if it's volatile, gold is volatile, it just has to be continuously worth something and fall in a somewhat sane trading range.

Suppose the demand stays the same. If the price doesn't move and half the miners shut down, that'l halve the network speed. For a time. Could be seriously bad PR, even if it isn't a technical problem.

The supply of bitcoins is always increasing. Halving the block reward only makes the increase slower.

No....
Simple problem of supply and demand.
Lesser supply, same demand, price increases.

yes but just speculative.  we don't know how adoption will go in next 18 months.

Yes, nothing, except that small thing where the price went from around $5 to $1000.  So, yeah, nothing happened.

Bulletproof logic.

No need to wait for that day, long before that fiat money will be flooded everywhere thus make bitcoin automatically stronger

Given that the reward halving is just over 18 months away, does anyone think that by then we will hopefully have a lot greater adoption of Bitcoin?

If this is the case, there will be a hell of a lot more users buying electronics, holidays and other luxury items with Bitcoin. The companies that are accepting BTC as payment may be less likely to convert straight to fiat too.

If the above is the case in 18 months time would it give greater stability to the market and prevent whales from exploiting the price by pumping and dumping? The above scenario would mitigate large downswings, yes? So we might see the value bump up immediately at the time of halving without too much drop.

Does my thinking make sense?

Well, the price of all coins would be the same, but I think we're getting into semantics and
irrelevant pontification.

What happened before the last halving? I was not involved in Bitcoin at the time but I heard the price started rising before the actual halving. A post here said it was priced in by the time the halving took place.

The next block halving will be Bitcoin's next catapult.

The trick is to accumulate as many as possible for as cheap as possible before that happens.

The price could easily dip to $200 first.

Then you must have meant to write "... half the supply of NEW coins, the price of NEW coins should ...".


Either way, the chart is what you are assuming, but there is no theory about what the demand and supply curves look like or how the supply curve will react to the halving, so you don't really know that the price will double.

Agree, and note that I didn't say that.  I said demand for NEW coins.

Mining revenue is only a small portion of the supply. Halving the reward will not halve the supply.

Also, remember that "supply" is really a curve and not a number, though people may also refer to a point on the curve at a particular price as the "supply".

I think the block halving will definitely have a positive price effect.

The question is how much of the general downtrend is caused by the current inflation.
I noticed that LTC fell 3X more than BTC last year and is has 3X the inflation, perhaps coincidental, obviously less inflation is always better but if there is something to that, the block halving will definitely be positive.

I have a strong theory though that the general downtrend is caused by the majority of businesses exchanging BTC immediately for fiat. 2014 was actually a great year for BTC in terms of investment, development, publicity and growth in utility yet the trend was consistently down. This constant selling pressure that isn't offset by corresponding demand is to blame imo.

I cannot think of a valid reason the block halving will do anything other than increase the price. The basic economic theory of supply and demand should come into effect here. I just hope there is a bigger demand for them then than there is today - which I think there will be - and then we should be good. It's exciting to wait and see that's for sure.

@teukon good thoughts, however, I don't know that those dynamics will fully offset the effects of halving the supply.  I tend to think they won't.  I'm also hoping  there won't be transaction processing issues as the cost of the gear itself is still a substantial part of mining costs.

Not just miners, but all early adopters. Coin distribution cannot get better without whales selling/investing majority of their holdings, which is a requirement for stability.

This is why I'm skeptical of the hyped winklewoss ETF. It brings in only more speculators which is not really optimal at this stage.

There would be a lot more and better ways to use 100K btc and help establishing the currency.

Miners hoarding coins isn't a good thing, we want them to dump.

Regardless of the influence it has on price (not saying it will be negative).

In a market of sufficiently skilled traders and speculators the halving will have no direct impact on the price at all.  This is because while monetary inflation will indeed drop sharply, there will be speculators that accumulate bitcoins before the drop and release them after the drop to compensate for this.

Unfortunately, the Bitcoin market is full of amateurs.  While there will undoubtedly still be a few keen whales out there that understand the basics of this halving mechanic and wish to clean up, they'll be confronted by an irrational mass of traders which, taken together, may represent a substantial chunk of trading volume.  The real game is in predicting and reacting to these traders and their sentiment.  Perhaps the price will plummet as everyone tries to buy bitcoins now and dump them after the halving.  Perhaps the price will skyrocket as everyone buys in on the news that inlfation has just halved.  This kind of uncertainty can give rise to volatility, even before the event.

One final indirect factor the halving may have on the price is in how a sudden drop in mining reward affects miner's willingness to mine.  If worldwide variance in mining efficiency (GH/s versus costs) is large at the time then the subsidy halving shouldn't cause any substantial block-frequency problems.  If variance is very low (only the most efficient miners are running) then the drop may make most/all miners instantly unprofitable and cause real transaction processing problems (as they drop out) which will mar the image of the network and hurt the price.

+1

But this reward halving will be different than the previous one; not for the price, but for the network. When the previous halving occurred, mining was operationally profitable for most people, before and after the event, next to no one shut down its miners, the only problem for miners was recovering their investment.

This time, it will be very different, mostly everyone is  already and will be very close to operational profitability before the halving. So it will be an interesting game of chicken who turns off/sells his mine first, I expect wild fluctuations.

Miners already have to dump a majority of their coins to pay for ASICs, electricity, and support. There are extremely competitive tight margins on mining.
If demand remains level you hypothetical should see market price double within a few months. In reality human psychology and market expectations may cause this bubble to occur
earlier in anticipation and speculators may drive this price up at least 4-5 times rather than just 2x. One should expect a crash months after any bubble if it grows 4-8x in value.

Historically, all crashes have landed on higher supports before as well. I.E.. previous support in 2013 = ~100 usd before bubble, and new support between ~270-320usd in 2014-2015.

Of course not mate .
Logically it will rise , because when the next halving block reward happens it will be 12.5 BTC instead of 25 BTC so less Bitcoin = more value obviously

IF less bitcoin mined while there are bitcoiner
So, bitcoin price should be better

Now, we'll first hit rockbottom and then stagnate until halving. So don't get all fuzzy.

A pump and dump could be expected for the halving because whales like excuses.
Any real demand isn't created with a halving.

With less supply introduced daily, this should have a positive impact on the price to slowly bring it up in the long run if there is no external factor like manipulation. But I don't expect it to change so suddenly or so drastic once halving occurs considering the size of the market which is so big with only less 1800 introduced per day. Also there are many factors which can come into play to affect the price.

Exactly. Good equestion. No advantage there. It's pretty clumsy.
Coders are no economists obviously. Bitcoin is much more volatile than would need to be.

There's several security considerations which make
Satoshi's scheme a good idea.

Andrew Poelstra has identified them in this paper:
https://download.wpsoftware.net/bitcoin/alts.pdf

I wonder why satoshi decided on this algorithm. These sudden drops could be dangerous.

50 50 50 50 50 50 ... 50 50 50 25 25 25 25 25 25 25 ... 25 25 25 12.5 12.5 12.5 12.5 ...

What's the advantage to choosing a stairway for the block reward over a smooth curve? Nice round numbers? Easily calculable final cap?

Interesting theory, but I believe miners are already "not holding".
I say this because the difficulty and hashrate has essentially flatlined.

This means more mining power isn't being unleashed
because it's not profitable to do so, which in turn
means miners are being forced to invest almost
all their revenue into mining just to obtain a slim
profit margin.  They can't afford to be holding
anything else.
 
So, given the same demand for new coins,
and half the supply, the price should theoretically double.


 

This all depends on what proportion they are dumping right now.

The block halving event itself will have no affect on the price. After all, nothing happened to the price at the last block halving.  Keep in mind that the supply of bitcoins from mining is small compared to the overall supply of bitcoins. A drop in the supply of bitcoins by 1800 bitcoins per day is not really very much.

On the other hand, fewer new bitcoins means less inflation and the price will rise higher as a result of increased adoption, over the long term.

If miners slow down their mining supply will go down and if demand remains the same and supply goes down the price will go up.

The reacting of the halving will be VERY interesting. The problem is that it might be a very slow exchange OR demand my drop...

Eh, no. If miners don't want to hold, after the block halving there are less coins for them to dump.

The conventional thought is that the next block halving will increase the price. However could this be completely wrong since if the miners will be getting less rewards, they will be dumping more and also shutting down their machines. We have seen theories that the price drop in recent months is due to miners not holding. Thus if the reward size is smaller then there is less incentive to hold.