In recent months, the blockchain community has been turbulent due to the presence of half of Bitcoin (BTC) in May. With the ongoing pandemic of the coronavirus, Bitcoin worked very well, especially when compared to products such as oil or gold, which were traditionally used as a reliable cover against market volatility. Part of the conversation about raising the price of bitcoins is “half.”
When two weeks go in half, what is real and why should investors consider existence? If what they say is true – when someone predicts that the price of bitcoin will reach $ 30,000 by the end of the year due to half – is this a good time for investors to enter the market? Before analyzing half and what this means for the market, Two Prime’s investment objective here is that “half will lead further up”: 50% up, 30% laterally, 20% down. This look is heretical.
Half the influence of bitcoin on the price of bitcoin
Half of Bitcoins refers to half of payments to Bitcoin miners when they mine a block. In finance, we talk about inventory and flow. If we use the analogy with a bath, the supply is the amount of water in the bathroom, and the flow is the amount of water that flows into the sink. Half to half will mean a stream of water in the bathroom. This means two things: firstly, it reduces the frequency of adding new bitcoins to the inventory; and secondly, since Bitcoin has no internal cash flows, it is not subject to discounted cash flow analysis.
Bitcoin's price is almost entirely dependent on psychology, with some tough price constraints, such as labor, equipment, and miner capacity. This is the net supply and demand that determine the price. Half is a restriction on the supply side, where we have the speed of launching a new bitcoin to the market and halving the loss flow. The market is very bullish in half. Historically, other breakthroughs have led to Bitcoin surges, so it makes sense to think so. Why will this time be different?
Double the value of bitcoins: half the bonus is equal to the value of the miner. Initially, miners participate in operations where the cost of bitcoins doubles overnight. If prices do not rise, miners’ margins will be a big blow.
This is a problem with bitcoins. If this happens to other industries, these types of margins will take them out of business in one night. We do not need to look further than the OPEC bid and oil prices in the 1970s to understand how supply shocks can ruin the real world.
Historically, miners had the greatest control over trading bitcoin reserves when they controlled the taps. Like OPEC at that time, bitcoin providers could influence the price in the market by controlling the supply and holding bitcoin until the price became right. To understand the full power of bitcoin miners in pricing, we need to look at the relationship between the current offer and the new offer as follows: dS divided by S.
The main argument in favor of Bitcoin bulls is that the whole other half has led to higher prices. According to the table above, miners should cover both their double and fixed costs. As a result, they will retain and limit new deliveries of bitcoins to a price suitable to cover these costs. This requires treasury, influence and patience. No doubt the miners have three.
However, if you follow the math, the dS-S ratio starts infinitely (10 million divided by zero) and ends with zero (approximately zero divided by 21 million). This percentage moves to zero as each half occurs. When relations are high, a group of miners with a high degree of interconnection can dictate the price – just like OPEC managed to dictate the price of oil in the 1970s. But when the coefficient is zero, miners have no power and can not determine the price of bitcoin. This is similar to how Iraq got angry on the oil barrel that he left when the US drowned in cheap gas energy and an abundance of nuclear materials. In other words, this does not mean what miners want.
In addition, the price dictated by the miners is due to a decrease in value, since bitcoin has already been mined. If the price of bitcoin falls below the cost of drilling it, the whole system will undergo very quick and potentially catastrophic changes.
The theoretical argument here is good: it's a watershed where it doesn't matter at all where the bitcoins are held by miners. The trend of miner price manipulation should be completely changed at this time and possibly vice versa. We would like to call this the “Bitcoin exit point.” The only question is when this will happen.