By CCN Markets: The previous adage “a rising tide lifts all boats” seems to be extra relevant to the crypto market than maybe another asset class. Want proof? Simply take a look at the resounding impression the looming bitcoin halving is having on nearly each main cryptocurrency.
The Halving is Bullish for the Bitcoin Value
For individuals who will not be acquainted, the bitcoin halving is a much-anticipated occasion during which BTC block rewards are lowered by 50 p.c. One halving occurs each 4 years.
From an financial standpoint, the bitcoin halving is a bullish occasion as a result of it considerably reduces the inflation fee of the asset that has a hard and fast provide of 21 million. The third halving will drop BTC’s annual issuance fee from 3.70 p.c right down to 1.79 p.c, which is decrease than the inflation fee of some rich nations. For example, the inflation fee within the US is 1.90 p.c.
Market members have responded by frantically shopping for the asset after each halving occasion, as inflation fee decreases intensify demand strain.
Within the first halving, bitcoin’s worth rose from $12.31 on the time of the halving to $994.21 a yr later for a 7,976 p.c rise. Within the second halving, the worth soared from $650 to $19,535 over a yr later for a 2,902 p.c surge.
Virtually Each Cryptocurrency Advantages From Bitcoin Halvings
We appeared on the altcoin market cap to see if different crypto tokens additionally benefited from the bitcoin halving. Unsurprisingly, different cryptocurrencies loved considerably greater positive factors than BTC.
Throughout the first bitcoin halving, the altcoin market cap rose from $45.89 million in June 2013 to $2.02 billion by December 2013 for a rise of 4,302 p.c. Within the second halving, the altcoin market cap appreciated from $1.74 billion in December 2016 to an all-time excessive of $555.91 billion in January 2018 for a meteoric rise of over 31,849 p.c.
There have been different causes for the market cap will increase, and correlation doesn’t imply causation. Nonetheless, there may be robust proof to recommend that BTC halvings catalyze huge worth will increase throughout the general crypto market.
The hyperlink between the bitcoin halving and the general cryptocurrency market is powerful. Actually, a 2019 analysis revealed that the costs and quantity of cryptocurrencies are extremely correlated. In different phrases, if bitcoin skyrockets, different cryptocurrencies are more likely to comply with swimsuit. This led to the conclusion that “when you personal one cryptocurrency, you personal all of them.”
Different Elements That Drive Crypto Progress
Additional analysis reveals that cryptocurrency development can also be pushed by two elements: media protection and investor consideration. One research on bitcoin and media hype concluded that returns are more likely to be elevated when media retailers point out the cryptocurrency extra ceaselessly and when Google searches enhance.
This phenomenon occurred in 2017. Media protection soared as bitcoin surged. As extra articles chronicled bitcoin, extra individuals looked for it on Google. The chart under reveals how the weekly quantity BTC-related articles spiked whereas the cryptocurrency’s worth climbed.
As well as, the variety of searches for the time period “bitcoin” on Google additionally spiked in the course of the 2017 bull run, coinciding with the rising weekly variety of articles.
The Backside Line
Traditionally, bitcoin halvings ignite a robust upward cycle that lifts the general cryptocurrency market. With the worth of bitcoin climbing, media hype and investor consideration balloon. The surge in investor consideration possible results in extra individuals shopping for BTC and different cryptocurrencies. As costs enhance, extra articles are written, and the cycle continues.
Briefly, the bitcoin halving is a large tide that lifts all boats.
This text was edited by Josiah Wilmoth.
Final modified: January 11, 2020 1:39 AM UTC
