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May 14
2020
What to Expect From the Third Bitcoin Halving

What are your expectations for the upcoming Bitcoin halving? Read our article about the halving scenarios the bulls and the bears can’t stop talking about.

The countdown is on, and block 630,000 is approaching. The third bitcoin halving starts a new era of this digital currency, which was created a mere ten years ago. Every halving is a unique event observed and celebrated by the millions of bitcoiners around the world.

The third halving is also different in that afterward, Bitcoin will achieve an annual inflation rate of only 1.8%. That's less than half of the world's average of 3.4% in 2019, and we can already tell that the global average will be even higher in 2020 due to the unlimited printing of fiat money by the central banks. 

But what does this mean for bitcoin? Is halving an event we should celebrate or fear? And what should we expect after the halving? Orange coin good, number go up?

These are just some of the questions that stir emotions and generate an unprecedented interest of the public and media in the third halving. Google searches for "bitcoin halving" are reaching levels higher than even the most enthusiasts expected. And while the bulls are thrilled about the halving and stacking satoshis for a possible celebration-worthy scenario where new all-time highs occur, he bears are careful, fearing a sour outcome. 

Speaking of celebrations, did you hear we’re throwing a Binance Halving Party? Join us on May 11/12 (depending on your local area) two hours before the halving, for our live stream to meet Binance staff, join the live discussion, and get a chance to win BNB! 

What are the expected outcomes of the third halving?

We can't predict what will happen after the third halving with any certainty, and most opinions are just educated guesses based on past behavior and technical analysis. Several factors will decide the outcome - the continued centralization of mining, the growth or decrease of the hash rate, the stability of the blockchain network, and of course, the price. 

We believe that every educated investor should always expect the worst, but hope for the best. So with this in mind, let's take a look at the possible halving scenarios.

The Worst-Case Scenario - The Mining Death Spiral

The worst and also most unrealistic outcome of the third halving is “the death of bitcoin.” Some proponents of bitcoin say that the halving might start a mining death spiral caused by the price drop, where miners sell more of their coins to keep their business afloat, creating selling pressure and forcing even more miners to keep selling. This scenario will ultimately result in ‘the death of mining and bitcoin’ as we all know it.

This type of speculation is nothing new. The mainstream media and proponents already danced on bitcoin's grave more than 380 times, just to see it go even higher after every obituary. Due to the increased interest of both retail and institutional investors, combined with the thriving bitcoin community, development progress, and ever-growing interest of the public media, this scenario seems to be the least likely of the four scenarios in this article.

The Painful Scenario - The Slowdown

The second scenario is not as dire as the first, but still not something investors want to experience. The fears are because of not only the possible downturn in the speed at which miners mine the new blocks, but also the potential slowdown in public interest and adoption caused by the eventual price drop. 

The increased mining difficulty will undoubtedly overwhelm some of the more inefficient mining operations, but the mining pools and large mining business will quickly make up for the hash rate decrease. 

The Realistic Scenario - Honey Badger Doesn't Care

The most realistic scenario is the one where we go through the halving the same way we did the previous two: as if nothing happened. 

There could be short-term shakeouts and selling pressure caused by inefficient miners and market speculators, but in the long-term, the hash rate should continue to move up slowly but steadily. In the past, each halving triggers a hash rate and price dip, but it also always resulted in the new all-time-highs for both of these metrics.

We believe that the benefits of bitcoin and its fundamental characteristics far outweigh the associated risks and concerns, and the millions of wallet owners would most likely agree.

The Winning Scenario - Bull Season?
And last, we have the scenario we’re all secretly hoping for - the full-blown bull season. Here we work with the prediction where the anticipation and public interest generate an influx of new money, increasing buying pressure, and driving the price to the new ATHs. With the increasing price comes the hash rate increase, and bitcoin market dominance grows.

Some of you will certainly remember the days when we went to sleep with $12,000 USD per bitcoin, just to wake up the next day and see it at $13,000 USD. And it continued growing like this for days. 

2017 was indeed a crazy year for crypto in general. Can we expect to see something similar in 2020? Only time will tell.

Halving or Not, Bitcoin Is Here to Stay

No matter which scenario do you consider the most realistic, or whether you even agree with any of them, one thing is certain - bitcoin is here to stay. The unlimited printing of fiat money, business lockdowns, and other economic measurements triggered by the COVID-19 crisis showed us how much we need sound money that is censorship-resistant, decentralized, borderless, and with pre-set inflation rates preventing sudden devaluation.

Add on the increasing access to renewable and affordable energy, combined with quickly improving internet infrastructure and access to knowledge, and you have another reason why bitcoin won't disappear in the foreseeable future.
The halving, however, makes one thing very clear and predictable - the decrease in supply.
After the third halving, there will be only one bitcoin mined every ten minutes, and after each subsequent halving, that figure will be even less. And although the majority of the bitcoin in circulation doesn’t come from mining, the chances are that the demand will eventually outgrow the supply.

Which scenario seems the most reasonable to you? Do you predict a different play? Let us know on Binance Twitter! 

Don't bet on predictions and promises. Take your financial freedom into your own hands with Binance.

Join us at the Binance Halving Party live stream on YouTube, approximately 2 hours before the halving on May 11/12, to learn more about the upcoming bitcoin halving and hear from industry voices!

*This content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Cryptocurrency trading is subject to high market risk. Binance cannot guarantee profits or reimburse any losses caused by trading. Please trade with caution. Your capital is at risk.