I want to talk about the future of Bitcoin. There are millions of dollars (many million Yuan) investing in Bitcoin mining equipment (the way new Bitcoins are made). But the way that Bitcoin works, the amount being produced is decreased every 4 years. This is happening next month!
What this means is that the supply channels that are selling newly made Bitcoins will have half of the supply. While the change may or may not be immediately reflected in Bitcoin prices, it will most definitely be reflected within the 6 month span post halving. Think of it this way… 12.5BTC less will be made every ten minutes. 12.5BTC x $680 x (6 times and hour x 24 hours a day x 30 days a month) = $36,720,000 USD (or about 238,500,000 Yuan a month) less bitcoin will be produced than is currently being produced. That means that this demand that is currently being filled by production will have to be filled by current supply.
If demand for Bitcoin did not change at all and never increased, the price would still increase due to the decrease in production. It is simple supply and demand. Now it is possible that there is some market inflation going on as the date of the halving is known in advance. This could possibly lead to a drop in Bitcoin value shortly after the halving, although in my opinion it would be a mistake to sell at this time. Why? Even though some will make money on short term gains if there is a price drop post halving, the production supply of Bitcoin will only be half. Considering that many large companies have invested millions in mining hardware either they will be forced to close up shop due to unprofitability or increase their selling price.
Amazingly it seems that the halving has also started to spur market growth in many countries recently (Japan, for example!). Trade volume is increasing in the USA as well, as the Chinese market is currently the largest market in trade volume.
To be taken into account for the Bitcoin halving and the recent price shift (upwards!) we must look at what caused the last major crash in the Bitcoin market, mainly Mt. gox. Nowadays Bitcoin trades are distributed across a large number of exchange networks, many of them very reputable. Don’t confuse this Bitcoin price increase with the inflation of years ago. While the speed of the increase is quite similar in pace, the infrastructure for Bitcoin use and implementation are much more developed this time around and the market is much more mature. Personally, I am very excited for the next few months of events with this cryptocoin that has a 10 Billion dollar USD market cap!
Factored into this upcoming halving we must also consider that Bitcoin is seeing more startup companies than ever, being accepted by more websites than ever, and is coming into a multinational spotlight. It will be interesting to see how the next few months go but all market indicators say don’t sell yourself short.