Over the past three days, the valuation of the entire digital currency market has surged by $3 billion. The increase in the overall market cap is as a result of the slight increase in the value of Bitcoin (BTC) and Ethereum (ETH). On the 29th of January, both Bitcoin (BTC) and Ethereum (ETH) surged by about three percent, and they are presently volatile in a tight price range.
Recently, a trader with an online name “Moon Overlord” said, “considering the performance of top digital currencies in the past, the halving of block reward of Bitcoin (BTC), Ethereum (ETH), and Litecoin (LTC) could pave the way for the recovery of these digital currencies in the mid-term.
The Effect of Block Reward Halving on the Value of Bitcoin (BTC)
Bitcoin (BTC) has a fixed supply. As a result, only one percent could ever have more than 0.28 BTC. Steve Lee – a former Google Product director explained that: “If you have 0.28 Bitcoin (BTC) and HODL, you can be certain no more than one percent of the present population of the world can ever own more Bitcoins than you. A modest investment of $1,830 today could ensure you are a 1%er in the future Bitcoin (BTC) world.”
As Bitcoin (BTC) gets closer to its total supply of 21 million, the block reward given to miners for verifying transactions on the network decreases to reduce the number of bitcoins generated by the network. A lot of analysts believe that the halving has already been priced in because it is anticipated by investors years ahead before it actually occurs.
However, a trader said that the block reward halving of Bitcoin (BTC) and Litecoin (LTC) and the decrease of block reward of Ethereum (ETH) by 33% could create enough bullish momentum in the digital currency space to significantly boost the value of digital currencies.
In a statement, the trader said: “Litecoin (LTC) is halving its block reward in August this year. Ethereum (ETH) is reducing its block reward by 33 percent this month. Bitcoin (BTC) is halving in a little over a year. Halving and block reward reductions are the most bullish events in the history of digital currencies. It is time to pay attention and start accumulating.”
Bitcoin (BTC) Price Today – BTC / USD
Bitcoin (BTC) is expected to see the decline of its block reward by 50% in May 2020. This would significantly reduce the rate in which miners mine new Bitcoins. The halving of the block reward will limit the circulating supply of the digital currency. If the demand of the digital currency remains the same or if it increases, it could have a considerable effect on the value of the digital currency.
Back in November 2017, Kim Grauer – a senior economist at Chainalysis – said that is very difficult to conclude if the decline in the Bitcoin’s circulating supply is already priced in.
Grauer said: “That is a very difficult question. On the other hand, direct calculations about market cap don’t take lost digital currencies into consideration. Considering how highly speculation this sector is, those market cap calculations may make it into economic models of the market that impact spending activity.”
Generally, the halving of block rewards is considered a positive catalyst that may trigger the recovery or the price rally of the digital currency market.