Will 2020 Halving Destroy Bitcoin? Or is Market Overestimating Risk? Huge Opportunity?
According to a recent poll conducted by Plan B on Twitter, almost 50% of people in crypto believe there's a chance of a mining death spiral occurring following Bitcoin's 2020 halving later this year.
Is this actually likely? Or is the market overestimating the level of risk? And could this help to explain why Bitcoin is still a long way from its S2F model valuation of $50-100k that it's expected to reach by the end of 2021?
Let's explore!
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Months after the halvening... maybe haha
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Mining death spiral - an interesting scenario!
I tend to agree that miners capitulation doesn't matter as the hashrate will fall until only profitable miners remain. So there could be an opportunity to buy Bitcoin at a lower price.
Expecting a dip right after the Halving - great chance to BTFD :)
I think it won't be much different than in 2016. Obviously, there will be many people whose miners, now barely paying for the power they consume, will be losing money once the reward is halved. But that is also how things were back in 2016. Some then decided to pull out of the game altogether, others kept on running their miners either because they weren't the ones paying the power bills or because they were looking forward for the price to climb higher and to offset the losses.
If too many pull out of mining, the difficulty will recede, making mining profitable again for some, luring them back. And, depending on the jurisdiction and on how people declare their mining income, (if at all,) some may actually be able to claim their losses as a deduction from their taxable income.
So I don't think we can expect a "death spiral". I remember sharp drops in value back in late 2013, then in 2015, but Bitcoin did recover after that, breaking records in 2017. So I don't believe we have much to worry about when the halving takes place.