Experts and long term investors are all gearing up for a mega bull run in the next year. The institutional professional Charles Edwards, founder of quantitative Bitcoin and digital asset fund Capriole Investments. Holds the opinion that 2023 is start of a new regime. Meaning, we are in the early stages of the bull run. This is time where long term investors will start allocating. He explained usually the period leading to Crypto bull run is volatile, which will be the case for 6-12 months. However, he believes the cryptocurrency will have a positive 2023. Which will lead to a significant and cyclical growth in 2024.
“Bitcoin stands at the start of a “new regime” after its early 2023 price gains, and next year will prove pivotal”Charles edwards
He further adds that, the sentiments have changed and we stand at a typical turning point. This highlights his optimism regarding the digital gold. Moreover, he further adds bitcoin has spent its second half of 2022 in $16 to 20,000 region. During this time it was trading at a lower NVT. NVT or network value to transaction value is an indicator like P/E ratio. It indicates the relative value of the network. NVT when operating on the lower band means the market is undervaluing BTC. Hence the BTC has been historically cheap, better value to buy. While, a high NVT indicates its relatively expensive, a time to manage risks. Thus, since second half of 2022 BTC has lower NVT. However, in 2023 the NVT has broken above the fair value. This highlights the new regime of the cryptocurrency, a start of a bull run.
Bitcoin halving and what it is?
Blocks is what makes a blockchain. Each block contains 1 MB of BTC. Miners compete to solve complex mathematical problems in order to add blocks. When successful this creates a 64 character output known as “hash”. These blocks are then locked so that they can’t be changed. In return miners receive bitcoins. So, Bitcoin halving involves a cycle where the number of bitcoin received every cycle halves. Each cycle involves creation of 210,000 blocks and after completion, the number halves. In order to control the bitcoin mining, an algorithm generates these mathematical problems which change. This is to keep the time (10 minutes) to create 1 block consistent.
50 BTC were received by miners at the time of establishment. In contrast, to now 6.25 BTC/ block. The first halving took place in 2012 when the BTC were slashed to 25, followed by 12.5 BTC in 2016 and 6.25 in 2020. Considering the trend and the 10 minutes times to create new block, its expected the next halving is 2024. Where the BTC will halve at 3.125. Considering the limited bitcoins (21 million) and halving cycle, its expected last bit of bitcoins will be mined in 2140.
How does halving matter? What are its implications?
Bitcoin halving history
|New Bitcoin per Block before Halving||New Bitcoin per Block after Halving||Price on Halving day||Price after 150 days|
In terms of the larger ramifications of halving, a reduced mining reward for Bitcoin decreases the sum of money that miners may gain by adding new transactions to the ledger. The flow of fresh Bitcoin into circulation is determined by miner incentives. As a result of halving these payments, the inflow of new Bitcoin is reduced. This is where supply and demand fundamentals come into play. When supply falls, demand increases or decreases causing price variations.
The halving event also reduces Bitcoin’s inflation rate. Bitcoin’s inflation rate was 50% in 2011, but after halving in 2012, it fell to 12% in 2012 and 4-5% in 2016. It presently has an inflation rate of 1.77% (as per woobul.com). This means that the value of Bitcoin rises with each halving. Every halving occurrence has typically resulted in a Bitcoin bull run. When supply declines, the price rises, driving demand to climb. This increasing trend, however, will be gradual.