- The law of supply and demand dictate Bitcoin (BTC) price
- In 2012, 6 months before halving, Bitcoin increased from $5 to $12
- In 2016, 6 months before halving, Bitcoin increased from $371 to $674
- December 2019 marks the start of the 6-month countdown for the 2020 halving
The law of supply and demand dictate prices
“The equilibrium between supply and demand is achieved only through a reaction against the upsetting of the equilibrium.”
Supply and demand dictate the price of an asset. Bitcoin (BTC) cannot be created at will. In fact, like gold, Bitcoin has a finite supply. There are only 21 million Bitcoins that can be mined in total. Bitcoin traders and investors have long been looking forward to the next bitcoin halving, scheduled for May 2020. After May 2020, the bitcoin rewarded to miners will be cut by half, reducing the potential rewards for miners significantly, disrupting the natural economic equilibrium of Bitcoin price. So why do we care about this?
Bitcoin (BTC) has a history of an unprecedented price increase during the 6 months before halving. The coin halved on November 28, 2012, and July 09, 2016. To truly understand the situation, we must examine exactly what had happened in the past.
During the 6 months before its first halving, Bitcoin increased from $5.27 to $12.56 in 2012
Based on historical price data, 6 months before Bitcoin’s first having, the asset rose from $5.27 to $10.57 from June to November, increasing 101% in price. In fact, for 4 months before the start of the 6-month countdown, the price of Bitcoin consolidated between $4.83 to $6.08. So why did this happen? We can only assume that interest in Bitcoin increased due to the realization of a more limited supply in the coming months. The realization led investors to invest heavily into the coin. However, does history repeat itself? The answer turns out to be yes, so far.
During the 6 months before its second halving, Bitcoin increased from $371.25 to $676.52 in 2016
Again, we see the same kind of price trend. Exactly 6 months before its second halving, Bitcoin’s price moved $371.25 to $676.52 from February to July, an 83% increase in price. Similar to 2012, 4 months before the start of its final 6 months before halving, we also noticed that the price consolidated from $362.73 to $434.46. This leads to the possibility of another Bitcoin surge.
The Bitcoin environment has changed significantly since 2012 and 2016. It is hard to tell exactly how Bitcoin’s halving will affect the price in 2019. Officially, the 6-month countdown begins at the start of December 2019. Therefore, we should be extra keen on the price change of Bitcoin in November and December since many investors already know this.