Bitcoin reward halving is just over a month away now and according to Anthony “Pomp” Pompliano, the co-founder of Morgan Creek Capital Management, the event will be “rocket fuel” for the flagship cryptocurrency.
The reward halving occurs every 4 years or 210,000 blocks that will see miner flow cut down in half from 1800 BTC per day to 900 BTC per day. Besides the reduction in block reward, this third halving will have the scarcity-based stock-to-flow (S2F) doubling to 54 years.
The host of The Pomp Podcast likened the halving to gold miners cutting their supply by half.
In the macro backdrop of quantitative easing (QE), the crypto community has started to call this big event, “quantitative hardening.”
“Bitcoin halving is “quantitative-hardening,” fiat undergoing lots of politically driven quantitative easing. Bitcoin supply algorithm starts quantitative hardening next month,” said Blockstream founder and CEO Adam Back.
QH is unlike QE started by central banks to combat the effect of coronavirus on the economy. QE allows central banks to create money which they use to inject into the economy by buying government debt.
Meanwhile, Pompliano feels QE will push Bitcoin to a new all-time high. “Over the next two years, I think that it will have hundreds of percent of appreciation, given the quantitative easing and the volatility it brings. My personal view is that we’ll see bitcoin hit $100,000 before December 2021,” he said.
QE aims to boost investment and spending in an economy by firing up the money printer. Unlike QE, the hard asset bitcoin only has a limited supply of 21 million BTC which will have a supply shock next month which as Adamant Capital’s Tuur Demeester puts, “QH3 is upon us. In May, the supply of new bitcoins will be reduced by 50%.”
“People talk about hard money – bitcoin quantitative hardening is the sound of bitcoin getting even harder. All while the world loses its fiat mind and plummets into quantitative easing infinity,” said Back.
By cutting down the miner flow in half, halving would also put a dent in the income of miners. According to BitMEX’s latest research, halvening can result in the decline of hash rate by 30% to 35%.
The hash rate of the network already dropped 45% last month after the price crash.
Also, this estimate is based on the assumption that the price of bitcoin won’t change, all miners are rational, and a big proportion of miners are operating at a profit.
The halving “will cause significant stress. On the other hand, given the actions governments have taken all around the world in order to mitigate the impact of COVID-19, many other industries will also be going through a challenging period at the same time,” said BitMEX.