Halving block reward will NOT double the price!

[ruski]

I have a very, very hard time believing the halving of the block reward is going to double the price. Whatever that price is supposed to be.

With 9M coins already generated, mining brings around 6500 new coins a day into the market. That's absolutely nothing against the volume that already exists. Assuming the worst case of every single miner selling their coins, on Mt Gox, that means we'll lose about 1.5% of trade volume. 1.5% does not 50% make.

What's more likely to happen, if ASICs aren't out yet, is the BTC network will lose a lot of hashing power and possibly implode. I hope it doesn't happen, but miners are not in control of the price anymore. Hasn't anyone else thought of this? Someone did think of this. My bad.

Disclaimer: I'm still long.

[1715390974]

1715390974

[ralree]

I think the difficulty and price will adjust such that GPU mining will still be profitable (unless ASIC).  We will see though!

[MaxSan]

I think a more reasonable number is 25-35% increase, not double.

[scintill]

No, it won't have any effect

I think it will have some effect, but no, not doubling instantaneously.

It depends on what people mean when they say it: what prices do you sample to see if it doubled, how long will it take to double, etc.

Edit: P.S. Panic about the halving and ASICs could cause a big sell-off before the halving, then after the halving it could recover and then gain a bit on top, possibly causing a "doubling" depending on how big the trends were and what the actual price is.

Also, the halving may be a bit more involved than people think (or at least I had considered) -- what if auxiliary services like pools mess up on the halving and give out too many (or too few?) coins, or GLBSE, etc. stocks' forecast is based on current block reward in ways people don't realize?  Situations like that might cause indirect effects on the market and price.

[ruski]

I think the difficulty and price will adjust such that GPU mining will still be profitable (unless ASIC).  We will see though!

Of course. One too many beers today. Please disregard my insane ramblings. I love Bitcoin

[VelvetLeaf]

Don't forget, pirate isn't around anymore 

[Stephen Gornick]

I have a very, very hard time believing the halving of the block reward is going to double the price.

Some believe that block reward drop is already baked into the current price.

What's more likely to happen, if ASICs aren't out yet, is the BTC network will lose a lot of hashing power and possibly implode.

Nobody knows the minimum level of mining capacity and its distribution that would still protect against an attack.  It has been estimated, however, that if an attack was done for financial benefit (i.e., using the attack to carry out a successful double spend)  then it is more than 10X more powerful than is needed to protect against that threat.  (i.e. it would cost millions of dollars to carry out an attack that would yield, at best, well under a million dollars worth of financial gain.

The reason the amount of hashing is so high is not that bitcoin needs such levels, but that the block rewards provides an incentive for this level of mining.  There's a big difference.   If hashing power drops in half after the block reward drops in half, we're still probably just fine.

[Stephen Gornick]

what if auxiliary services like pools mess up on the halving and give out too many (or too few?) coins,

each and every node verifies each block to ensure it complies with the protocol, or it rejects the block.  This has been coded (and tested) long ago.

[sapoleon]

I agree to MaxSan,
the cost to mine are not irrelevant, but if many miner quit/stop the difficulty will go down as happened after the last big bubble exploded.
i sold my horded coins in the last days. big mining profit converted into fiat $.

[mp420]

The block reward halving will have a long term effect that will cause (and has already caused) some upward pressure. The only immediate effects it may have are psychological.

[P4man]

Whoever said it would double because of it, is an idiot.
You might expect price to double if the total amount of bitcoins where to be halved somehow. But thats not whats happening at all; in fact the total amount of bitcoins is  going up quite rapidly now and will continue to go up after december. Currently there is a ~20% per year inflation, when the reward is halved,  it will still be ~10% per year.  
The only reason price is going up instead of down is that demand grows even faster, but just to maintain a given BTC price, demand will have to keep increasing for the foreseeable future.

[Lumpy]

There should be some other option in the poll other than double or nothing... as others have posted, I think the price will likely increase but not by that much.

[odolvlobo]

Whoever said it would double because of it, is an idiot.
You might expect price to double if the total amount of bitcoins where to be halved somehow. But thats not whats happening at all; in fact the total amount of bitcoins is  going up quite rapidly now and will continue to go up after december. Currently there is a ~20% per year inflation, when the reward is halved,  it will still be ~10% per year.  
The only reason price is going up instead of down is that demand grows even faster, but just to maintain a given BTC price, demand will have to keep increasing for the foreseeable future.

Good explanation. Assuming demand (or increase in demand) remains constant, halving the reward will cause the price to go up faster, but it won't immediately double it. The 30% drop today shows that the current demand is a little frothy, and I think the price will increase more slowly going forward -- until the reward halves.

[finkleshnorts]

The 30% drop today shows that the current demand is a little frothy

No it doesn't. It shows that someone did a surprise dump of 38,000 bitcoins. That the market rebounded so quickly shows that the demand is anything but frothy. That was quite a rebound.

[ruski]

The 30% drop today shows that the current demand is a little frothy

No it doesn't. It shows that someone did a surprise dump of 38,000 bitcoins. That the market rebounded so quickly shows that the demand is anything but frothy. That was quite a rebound.

+1

[FreeMoney]

What would happen to the price if it turned out we all misread the code and the halving won't be happening?

Point being that we've all always known. The halving is a part of bitcoin and has been influencing the value since the beginning. In my opinion, without halvings no one ever adopts bitcoin and the value is 0. So the halving does way more than double the price, but it doesn't do it when the halving happens.

[odolvlobo]

The 30% drop today shows that the current demand is a little frothy

No it doesn't. It shows that someone did a surprise dump of 38,000 bitcoins. That the market rebounded so quickly shows that the demand is anything but frothy. That was quite a rebound.

The sell-off happened over a period of 2 hours and consisted of hundreds of trades of 80,000 or so shares. I don't think it was a 38,000 dump by one person (but I could be wrong). I am assuming that most of it was panic trading, so that it why I consider the rise and this selloff frothy. Now that the weak hands are out, I think that prices will continue to rise from this lower point, but at a more reasonable rate.

[finkleshnorts]

The 30% drop today shows that the current demand is a little frothy

No it doesn't. It shows that someone did a surprise dump of 38,000 bitcoins. That the market rebounded so quickly shows that the demand is anything but frothy. That was quite a rebound.

The sell-off happened over a period of 2 hours and consisted of hundreds of trades of 80,000 or so shares. I don't think it was a 38,000 dump by one person (but I could be wrong). I am assuming that most of it was panic trading by "speculators", so that it why I consider the rise and this selloff frothy. Now that the weak hands are out, I think that prices will continue to rise, but at a more reasonable rate.

I could be wrong too. I'm too lazy to check the stats myself, but I remember reading that a 38,000 dump set it all off, and the panic selling ensued thereafter.

[byronbb]

Already built into the price. I'd fade any rally at the block halving.

[makomk]

I think the difficulty and price will adjust such that GPU mining will still be profitable (unless ASIC).  We will see though!

Well, in order for the difficulty to adjust by much a large proportion of the miners by hashrate would have to stop mining, which they'd presumably only do if it became unprofitable for them. So whilst the difficulty would adjust it'd probably still leave mining unprofitable for most GPU miners.

[scintill]

what if auxiliary services like pools mess up on the halving and give out too many (or too few?) coins,

each and every node verifies each block to ensure it complies with the protocol, or it rejects the block.  This has been coded (and tested) long ago.

I know the nodes and protocol are fine, but pool software could credit too high "unpaid rewards" based on shares, into pool accounts.  If it amounted to anything substantial and the miners noticed before the pool operator and cashed out, the pool could lose coins.  (I'm assuming they usually have an address holding enough coins to meet anticipated payout demand, and the software automatically transfers whatever balance is on the pool account.)

[finkleshnorts]

what if auxiliary services like pools mess up on the halving and give out too many (or too few?) coins,

each and every node verifies each block to ensure it complies with the protocol, or it rejects the block.  This has been coded (and tested) long ago.

I know the nodes and protocol are fine, but pool software could credit too high "unpaid rewards" based on shares, into pool accounts.  If it amounted to anything substantial and the miners noticed before the pool operator and cashed out, the pool could lose coins.  (I'm assuming they usually have an address holding enough coins to meet anticipated payout demand, and the software automatically transfers whatever balance is on the pool account.)

Pool ops are well aware of the reward drop and will plan accordingly.

[DublinBrian]

Point being that we've all always known. The halving is a part of bitcoin and has been influencing the value since the beginning. In my opinion, without halvings no one ever adopts bitcoin and the value is 0. So the halving does way more than double the price, but it doesn't do it when the halving happens.

+1

The halving is already incorporated into the price, to a certain degree. As we get closer to the actual event, more and more of it becomes incorporated into the price.

[lucif]

Halving block reward will decrease the ask on market. This will absolutely have effect on price dynamics. Of course, if there will be no bubble on market (i.e. market will not be overbought).

[P4man]

Halving block reward will decrease the ask on market.

Actually, no. As long as there is a block reward, the amount of bitcoins will increase and thus ask will increase. At a slower pace than today, but its still a tangible increase. Whether or not bids will keep pace with this increase is what will determine future pricing.

[n8rwJeTt8TrrLKPa55eU]

Reward halving will have no meaningful effect on price or, possibly, might cause a short-term price drop when speculators who have stupidly bought expecting a quick double are disappointed and try to exit en masse.

The dynamic in Bitcoin is exactly the same as in gold mining because Bitcoin, like gold, is a hoarded (i.e. monetary) commodity.  Gold/Bitcoin moves up or down almost exclusively due to fluctuations in investment demand, regardless of mine output.

As an example, consider that the insane price volatility of this past Friday occurred with coins being produced at a constant rate (50 every 10 minutes).  So clearly the immutability of incremental supply had no impact whatsoever on keeping the Bitcoin price constant as well.  The fluctuations in demand (both short and long term) far dwarf the hourly output of 50 (or 25) coins per hour, because even with a 20% inflation rate, the amount of coins already held massively exceeds the amount of new coins being produced at any given time.  So coin price is determined by whether existing coin holders decide to sell or keep their coins, and not by anything that the miners are doing.  Confidence and demand are the only meaningful price drivers.  

Obviously the gold market is much more mature and further along than Bitcoin, but the principles at play are identical.  For further stocks-to-flow analysis of monetary commodities, replace "Gold" with "Bitcoin" in James Turk interview below:

Stock to flow ratio is key to understanding "Bitcoin":
http://www.youtube.com/watch?v=M9A7CZgPld8

[IIOII]

Point being that we've all always known. The halving is a part of bitcoin and has been influencing the value since the beginning. In my opinion, without halvings no one ever adopts bitcoin and the value is 0. So the halving does way more than double the price, but it doesn't do it when the halving happens.

+1

The halving is already incorporated into the price, to a certain degree. As we get closer to the actual event, more and more of it becomes incorporated into the price.

+1

I think after the ''halving event'' took place a price drop is much more likely than a doubling. Though I expect substantial expectation driven upwards movement before this event.