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‘Perfect storm’ brewing for bitcoin price


The bitcoin price is known to be extremely volatile over the short term, but the past couple of months have been a particularly wild ride for the crypto asset. After hitting a 2020 high of over $10,000 in the middle of February, it was lower than $5,000 a month later. Since then, the price of the world’s most popular cryptocurrency has recovered somewhat to around $7,300, Forbes reported.

These extreme fluctuations in the price have many speculators wondering what will happen with bitcoin next, especially in the context of massive, debt-based government expenditures in response to the coronavirus pandemic. 

Excitement around the price of bitcoin may increase over the next 33 days, as the third halving event in bitcoin’s history approaches. For those who don’t know, a halving in bitcoin is when the number of new bitcoin created roughly every 10 minutes is cut in half. This change in the bitcoin issuance rate is scheduled to take place every 210,000 blocks (around four years).

Recently, Blockware Solutions CEO Matt D’Souza discussed the implications of the upcoming halving on an episode of The Stephan Livera Podcast. Blockware Solutions recently put out a full report on how the bitcoin price is greatly affected by the level of efficiency achieved by miners on the network. The report also covers this mining-related phenomenon in the context of the halving.

“It’s kind of like this perfect storm for Bitcoin,” D’Souza told Livera during their chat.

Miner capitulation

While the halving of bitcoin’s issuance rate has obvious effects on the supply-side economics of the bitcoin market, Blockware Solutions makes the case that the implications of the halving for the price of bitcoin go far beyond changes in supply.

As outlined in their recent report, the halving also has the side effect of putting newly-created bitcoin into stronger hands due to the fact that inefficient miners with small margins will be pushed off the network once the block reward subsidy is cut in half.

“Capitulation is a very good thing,” explained D’Souza. “It’s removing the inefficient miners. They no longer get their rewards. Their rewards get allocated to the efficient miners – the guys that have deployed correctly that have low [cost] electricity. And those are the strong hands. We want bitcoin in their hands because they don’t have to sell as much bitcoin. Their margins are good, they don’t have to sell as much bitcoin, there’s less sell pressure on the network, and the bitcoin price could increase.”


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