A simple law of Economics Supply and Demand has remained the cornerstone of predicting a whole lot of business happenings in the world. You cut the supply, and demand will rise while pushing the prices of the commodity higher. In the case of Bitcoin, we are anticipating the same supply and demand law to help push the market cap of the largest digital coin towards the north. The upcoming April 2020 will witness halving the Bitcoin mining reward, which will cut the supply of the Bitcoin in the market and hence, is expected to push its market cap.
Past Scenarios of Prize Halve
As of now, the current market capitalization of Bitcoin is pegged at $0.1 trillion. In comparison, Gold commands the market capitalization of $8 trillion, way above the Bitcoin. Even in its prime. i.e., on December 2017, the market cap of Bitcoin was at $0.3 trillion.
A comprehensive analysis of the previous bitcoin halving rewards indicates that after the prize cut, there is a huge surge in the demand and valuation of Bitcoin. For example, turn the clock back to November 2012, when the reward was at $12 and with mining of 50 Bitcoin/block equivalents to $600 per block; the market was getting an influx of Bitcoin worth $604,800. With halving, the worth reduced to $302,400 per week, which in turn caused a sharp increase of $14 billion in the net valuation of the coin.
This steep rise was unusual for the coin though even more staggering rise in the valuation was witnessed during July 2016, when the next bitcoin halving took place. Before the reduction, the market was getting a supply of Bitcoin worth $16,380,000 (with a prize of $650 for a total of 25 coins mined per block). Bitcoin registered compounded growth rate after the mining reward was halved with the market absorbing $8,190,000. From thereon, the valuation of Bitcoin surged by mindboggling $300 billion in a period of the next 18 months.
Applying the same logic, many in the crypto industry are predicting that the upcoming halving exercise is going to shoot up the market capitalization of Bitcoin by trillions. The rise could span across the next couple of years. It might not be good enough to place Bitcoin head to head with a capitalization of gold, but if things happen as per projections, the next round of reward halving is going to be a game-changer for the future of Bitcoin and overall cryptocurrency market.