Bitcoin Forum

For those of you around since 2011 or early 2012, what effect do you think the last halving had on price?

Looking at the charts there was a runup from mid 2012 to September 2012 where the price basically doubled from 7 to around 15.  Then, of course, was the hugely crazy bullishness of all of 2013.

Do you think the halving was the cause of one or both of these things?

Some people say that since there wasn't an immediate bump before or after the last halving, that the effect is overrated. But that theory sounds just about stupid.

I'm curious in "hindsight is 20/20" answers from people who lived it.

I ask this question because I am speculating on the effect(s) of the next halving.

I don't think it has as big of an impact as most think. It's not like the number coins available is cut in half, just how many new coins are created each day is cut in half. Also everyone knows it will happen and when so its no surprise to anyone.

I say you may see a bump in price but don't expect it to double over night.

when it was happening the general idea was that it would have no effect on price since we all knew it was going to happen long b4 it happened, it wasn't unexpected and there for "priced in" and that bitcoin was going up for far more compelling reasons.

i agree with this.

and its still true, we all know there will be less coins mined over time, it is infact a reason why people buy bitcoin in the first place (limited supply) therefor priced in at all times.

If the halvings were so straight-forward, it would be too predictable. Many are already speculating on this point. Summer-ish 2012 shenanigans must keep pirateat40 in mind. :)

Something which is known to happen would get priced in immediately, wouldn't it?
PS - I am definitely not an old timer.

Yeah, this. It always seemed price in and no real effect afterwards. Oh June 2011 how long ago you now seem. I hope to look back on this summer with the same semi sorta fondness. "Damn that sucked when the expected bubble didn't happen and the price dropped in August. Well who cares since the price is now $25,436!"

I'm in agreement with the other oldtimers: the halving really didn't do much in terms of price increase. 

However, I think this halving will have more of an effect, and that said effect will not necessarily be seen pre-halving.

It has an impact but is not the main reason why the price went up.. neither the asic transition.

I distinctly remember preparing for the worst. I sold all (!!!) of my bitcoins a few days before in case there was some kind of glitch in the halving process... and then I waited, and waited, with everyone else as we got to the block halving event. It worked without a hitch... and the price didn't change at all. I bought back in and then the great rally from ~$13 to $266 happened over the next several months.

I agree with all accounts that it had little effect on price at or around the time of the halving. Remember, the price was already at $31.9099 well before that so the doubling from $7is to $15.40 was just a typical Bitcoin price swing at the time. I think the huge price rise that followed a few months later was just a coincidence that it happened near the same time. It was something that (without the suppressive power of Pirateat40) may have happened much sooner. Or at the same time, without the speculation surrounding the Cypriot bank crisis, may have happened much later. Everything fell into place at the right times to allow it to be circumstantial at best.

Wow - so every response so far is in agreement didnt have that much of an impact. And that the bubbles that started in 2013 were absolutely not related.

Hmmm. So 1/2 the new bitcoins available on the open market and the effect is always priced in early and does not create supply issues backend.

While I think its more measurable to see that the price might not run up to a halving, I think its less measurable to see the effects of halving 3-12 months down the road. Especially with the gargantuan hashrate we have now that could be even more extreme in 2 years.

Maybe I'm crazy, but it seems that at least the last bubble was caused by a literal lack of supply. There were times in the runup where Chinese exchanges literally ran out of coins. I would think that a halving would have a potential effect here.

Events that are foreseeable by all, of which everyone will draw the same conclusion, can probably only be acted upon in a contrarian manner.

I remember that some miners tried to convince people that halving was a bad idea and has to be changed. They created FUD that the hashrate would go down, so on the security and will ultimately doom bitcoin. That created some uncertainty around bitcoin but we all know that it finally turned out just fine as expected. It also proved that trying to remove or change the halving is pretty futile. It didn't have any effects on the price though as everybody already priced their bitcoins considering that 21M limit.

Of course it has effects, sooner or later.

When you have daily supply to dump on exchanges cut in half, it can't do no wrong to the price on them.

i disagree. it definitely had an effect. it's just a matter of how one defines when it kicked in.

just b/c we know we have all these halvings in front of us doesn't mean they get priced in today.  imo,there wasn't any effect until around 6 mo before the last halving (it was Nov 2012, right?).  the forward looking pricing-in effect is offset by the never ending threat of the death of Bitcoin or a gvt-led 51% attack that will wipe out the network at any moment. also like Chris said above, the fear that something might go wrong at the time of the halving.  as time gets nearer, ppl get more confident and antsie to make a front running move, which i think was about 6 mo prior to last one.  after it went off w/o a hitch, the price skyrocketed to 260 or so in April 2013.

of course, the next time will be different.

I got interested in Bitcoin around the end of 2012, around the time of the block halving.

I've always attributed the block halving to that rise from $13 to $266 (although now I know many other factors were at work)

I remember starting the newsletter in April 2012. I remember pleading with subs to buy all dips into the end of year in anticipation of halving. We were stuck between 4.5 and 5.4 for months until May when things started to get volatile in an upward direction, first to 15.5. I don't remember any specific news around them that would account for an immediate effect like that on the price.

Re: summer 2012 - I believe Pirate's ponzi was one of the causes for both price surge and crash.
Anticipation of Dec 2012's reward halving might indeed have been another cause of the rise from 5 to 10. It also caused the hash rate to flex a bit (because of last GPU miners quitting I suppose)... but after reward halving, the doom scenario did not happen. So new January 2013 money came in and met a smaller offer than their demand.

TLDR: I don't know.

If everyone knows there will be a future squeeze on supply, you don't think that gets priced in early? It inevitably results in diminished supply (obviously), but the % of mined coins brought to market is so miniscule as it is already. You think it would just cut that in half? I don't think so. Lots of hoarded coins waiting to fill the gaps.

Well if the consensus is there is no effect, then what does that tell us?

The bottom line is I dont subscribe to the notion that most of the people trading/buying/selling bitcoin have the slightest clue about what "priced in" even looks like. Quite the opposite. I think most of these people do not.

Such is the reason I wanted to get opinions.

I don't think the consensus is there is no effect, rather that how and over what period are completely unknown. Regarding "priced in", perhaps you are right. But I also don't think anyone could point to a chart and say, "the halving caused the price to begin rising here."

My theory is that it was the reason for the rally in 2013. My model is following - overall there is a balance between the money that flows into bitcoin world and the BTC produced - the halving disturbed that balance. The effect was not immediate - because there is some stickiness in the price (the mechanism for that sticiness is quite complex - but it includes 'pricing in the effect' and also standard 'getting used to the price') - but over a few months the imbalance grew so much that it suddenly broke that stickiness and bubbled in the rally. Pricing in is probably not so efficient when you have something that accumulates over time - instead of a one-time event.

exactly. the expected supply shortage was probably "priced in" by the time halving happened, but that pricing in process (people hoarding coins and sitting on them waiting for future growth) also have led to growing imbalance in supply-demand resulting in a closed feedback loop which unrolled during 2013.

i.e. the market's pricing in have seriously underestimated the effect of the halving together with higher demand. maybe next time it will be different.

This:

and this:

It certainly had an effect last time around. However that could also be because people underestimated the effect of the halving of the daily supply. This time the halving may be incorporated in the price, or over-incorporated (making the price go down after the halving) or under-incorporated just as the first time (making the price go up afterwards). There's no way to tell for sure except with heinsight ;)

Not an old timer.

The effect of dogecoin halving while price remain flat and downtrend cause the network difficulty to go down in half. I imagine bitcoin will have similar effect IF price doesn't go up while the reward cut in half.

Another way of looking at this is that because everyone knows it's going to happen beginning way back in 2009 and when, then the entire price rise from then until now should be a smooth linear rise. That clearly isn't the case. It's been punctuated by ramps and crashes with long periods of consolidation in between.

Point being, somewhere around the next halving, volatility is going to increase.

If the price do not double, then half of the network hash rate going to disappear over the weeks as the inefficient miners can not even cover the electricity cost.

Since people have mining contracts they can't just stop....

Hopefully supply will stagnate and price will rise due to scaricity :)

Halving was already priced in to the exchange rate by speculators -- so it occurring didn't cause a shock.

Halving was not really considered by most miners.  Many of them were pretty surprised to see their yield drop (in terms of XBTs) by half.  Some of these miners had bought mining hardware because buying at an exchange was difficult, at best.  So when the returns (in terms of XBTs) dropped there was some buying pressure once they discovered that methods available from the exchanges had improved.

Now that a much greater part of the world has exchanges, that buying pressure from the miners that came with the first halving won't repeat for the second halving.

Since many miners sell much of their bitcoin revenues, this next halving will likely have a bigger impact on liquidity after the halving occurs than the first one did, IMO.   i.e., the loss of supply of $50K /day (calculated as 3,600 XBT/day at $14 each) had a lot less impact than will $1 million/day (calculated as 1,800/day at $555 each, or whatever it will be then).

It will all depend on market price but relative to the total supply going from 50 to 25 was a lot bigger than from 25 to 12.5. The amount of coins that will be mined less will be halve and the outstanding Bitcoin base has only grown since then.

This really is a great question! Even if the halving is already priced in to a big extent (since it's in Bitcoins DNA so to say, after all) the amount of coins being put into circulation goes down significantly and I do believe it is, at least, an accelerator for an increase in price!

Next time won't be different. Traders will expect again that it is priced in. But it isn't.

Priced in or not, there is going to be half of daily supply than before.

As long as other fundamentals are similar, that has to lead to price rise sooner or later. It's only the question where the price will be at that point. Maybe we will be at 100$ and halving to cause us go to 200.

i would say that the 2016 halving is definitely not priced in yet.

Only after btc users realized there is a sudden shortage of coin will cause the price to spike.

The efficient market theory is a flawed theory indeed ;)

but it is efficient in that speculators are not willing to buy it up this far ahead.  a boatload of things could happen btwn now and then.  like i said, the first indication i got that speculators were starting to front run was the run to 15.5 May 2014.  and that was after a month of me urging my subs to start accumulating.  someone is going to try and front run for sure.  it's just a matter of detecting when a significant # of them start to act in concert driving the price up.  at the time, 6 mo ahead was a perfectly reasonable time to start doing so.

Well market prices of billion dollar companies fluctuating at several percentage points each day at least is another useful hint ;)

Anyway, if you want to front run, just start accumulating today.

indeed, that is one strategy:  buy all dips. especially ones at the end of an 8 mo stagnation.

I am in the pirateat40 school of thought. During late 2011 and until August 2012, pirateat40 impacted the market by depressing the XBT/USD rate. This is typical for a massive short position. One the market realized that the pirateat40 coins were never going to hit the market because they had already being sold the stage was set for the major rally in 2013. The halving comparably had little if any impact.

Here is my perspective which may be different than others.  A lot of the discussion in this sub-forum tends to be more "trader" dominated.  Large spectrum ranging from novice get rich quick, seasoned traders, academic traders, technical traders etc.  I'm none of those.  I understand business and markets but am not a professional trader.  I got involved for different reasons.

A. I thought it was a good idea to shake up the banking and finance industry (including irresponsible government fiscal policies).  We've watched the information age transform business, communication, information, media consumption, etc.  Banking has been highly controversial over the last 2000 years.  Here are a couple favorite perspectives from leaders who championed the best of American ideals.

“The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity.”
- Abraham Lincoln

"The real truth of the matter is, as you and I know, that a financial element in the large centers has owned the government of the U.S. since the days of Andrew Jackson."
- U.S. President Franklin D. Roosevelt in a letter written Nov. 21, 1933 to Colonel E. Mandell House

B.  I have always been a computer enthusiast.  I've built more than 100 computers and it was enjoyable to push another frontier with CPU and GPU mining.

My perspective on the halving.  It has a large impact on mining.  It will obsolete a ton of gear in an instant.  We are already headed to greater and greater centralization of mining and this will add to it.  Centralization was not at all the intent of bitcoin and if not addressed this momentum will reform around a 2.0 digital currency that is decentralized and probably has other core innovations.

I disagree about centralization being inevitable in Bitcoin mining, but let's assume it is true.  How would you change mining to make it more resistant to centralization?

Ideally the "peers" should be CPU based.  That enables broader participation and access.  The trend to more and more specialized equipment GPUs --> FPGA --> ASICs leads directly to the network being more commercialized.  Like any industry, the companies working in this space will compete and this typically evolves to a monopoly or oligopoly.

The title of Satoshi's PDF is "Bitcoin: A Peer-to-Peer Electronic Cash System".

We are quickly moving to the point where mining is controlled by a few big players.  Increasingly you see the ASIC server farms being collocated in data center type facilities in locations with very inexpensive power.  

That's not peer-to-peer

It is impossible to make something that a general purpose CPU can do better than a custom chip, so try again.  Well, impossible is a strong word, but I'm going to need a plausible explanation of how you are going to achieve such a feat.

halving will drive prices up!!!

A highly customized chip can do 1 thing better.  If you adapt what it needs to do beyond its original design it becomes worthless.

This is true.  So how does this fact help you design a coin that resists custom chips unless you change the algorithm all the time with no preplanning of what is coming next?  That may be a possibility, but the decision as to what to use next would need to take place publicly so insiders can't take advantage and build custom chips.  There are also common operations in nearly all hashing algorithms, so a custom chip that could handle multiple algorithms could probably still outdo a CPU or GPU.

Hogwash. It doesn't matter what hardware is used for mining. If mining is profitable, then big farms will be built. That's how people think. If you can make $1 per day mining on a desktop CPU, then a farm will be built to mine $1,000,000 a day on a huge farm of desktop CPUs. We saw it in the early days of mining when botnets were redirected to mining purposes.

Also this.  So again, I ask, how are you going to stop centralization?  The important thing is not that we keep the big players out, it's that anybody who want to can be a player and that even if you aren't a player, you can verify things aren't wonky with just a CPU.

True, I also recall admins at schools and businesses getting in trouble for CPU mining on their machines without permission as well.  I dont claim to have a technical solution on exactly how to make it more "peer-to-peer".  I'm sure it could be done.  I think a lot of people active in theses forums have a lot invested in bitcoin and thus tend to be quickly dismissive of anything negative.  I really like bitcoin.  If I didn't I wouldn't be here.  I'm bringing fourth my perspective to generate constructive dialog on an aspect of bitcoin that I believe is stuck on a path that will cause more centralization.

It seems pretty obvious to me that mining is becoming more centralized.  Give me some reasons you think its not and wont naturally evolve to that?

I'm not dismissive because I'm heavily invested... my holdings are tiny.  I'm dismissive because I've been involved on a very technical level since 2010 and I have training and work experience building computer hardware.

Mining has a tendency to centralization today because mining hardware is not commodity hardware.  It is produced by very few people, and those close to the manufacturers are the ones who have the large operations.  Once the hardware manufacture catches up with the top of the line manufacturing processes used by CPU and GPU manufactures, there will no longer super-moore's law gains in efficiency and the margins will be squeezed out of mining hardware production.  At this point, there will be nobody with an advantage and mining will once again decentralize.  It is just a speed bump, not a "new normal".

Thanks for sharing your perspective.  I like a lot of it and I hope you are right.  But, even if you are right that the hardware becomes commoditized and readily available there are still economies of scale that will make it more profitable to be bigger and drive those with lots of capital to make bigger operations in areas with very low power costs.  The effect of that would be driving out participation by anyone not living in areas with artificially low power costs.  Wouldn't it?

Yes, mining will tend to cluster where power is cheapest, but other factors are in play.  For example, in the apartment I am currently renting, I have electric heat.  Mining hardware is just as efficient as an electric heater, so for the 6 months a year I need extra heat, running mining hardware is essentially free.  Other than power costs, and perhaps saving a small amount per unit on shipping 100 vs 1 unit there isn't much economy of scale involved in mining.

Those days where awesome. I was playing around when price was 13$, and watching the price increase 8-25% everyday for about 4 months was the funnest thing I could imagine. It's like, well I made another 3 grand today, oh another 4 grand, okay im rich