My last prediction of the year! This is a good one, I promise!

[arepo]

I was responding to another thread somewhere and a thought entered my fertile mind:

next halving of bitcoin will take place by end of 2015.

If you don't already know what "halving" means, it means that around every 10 minutes, a block of bitcoins will be rewarded to a miner and the reward will be halved from current 25 to 12.5 bitcoins.

The exact date and time of the next halving is not quite certain, it just depends upon how many blocks will have been mined then. As we all know, the hashrate has been greatly accelerating and this acceleration is causing the date and time of halving to be earlier and earlier than expected.

This event, "halving of bitcoin reward for mining", will most likely result in overnight spike in, whatelse, bitcoin price. It should at least double:

so, if the prevailing bitcoin price on, say, October 15, 2015 is $50,000 (which admittedly is a conservative amount) and if the halving takes place at midnight on October 15, 2015, then the next morning, October 16, 2015, we will see an overnight doubling to $100,000.

This is a highly simplified version of what can happen in 2015. Many people will drive up the bitcoin price IN ANTICIPATION prior to the event and there will be many opportunities for panic buying and panic selling as well, as new entrants try to grab the dwindling supply of the new coins.

These are tumultuous times.

TL;DR -- lurk moar

this has been discussed ad nauseum from the beginning of bitcoin time, most recently around the last halving. here are a few things to consider:

1) while the bitcoin market is still grotesquely inefficient in many ways, protocol fundamentals like the reward halving are largely well-known in the bitcoin community, and it is likely that not only will the event be "priced in" far before it actually occurs, but also that every future reward halving is already priced in.

2) block reward halving is a far cry from a halving of supply, so even the most basic keynesian interpretation does not suggest that the price should double.

3) block reward halving is better modeled as a halving of the inflation rate, something that modern economists still can't agree on regarding its effect on markets, so good luck anticipating its effect on price.

--arepo

[ffe]

mining becomes less and less relevant as bitcoin grows

Sorry if I have misunderstood something but mining is actually necessary to keep the blockchain updated with payments. It is therefore important to factor this into the argument for the future. When Bitcoin takes off as a payments system (both Bitcoin transactions and Fiat > Bitcoin > Fiat [think Bitpay] transactions) then miners are powering the engine that keeps this system going. It will be necessary that they remain profitable in order that they stay in business to power the system - the price of Bitcoins must be satisfactory to the miners - but you should also remember that they will take a share of transaction fees within the system, which should count for more, a lot more, in the future.

No one is guaranteeing miners anything, least of all profitability. If they are necessary and useful, transaction fees will go up to replace the reward Bitcoins lost per block. Note this requires that users must feel _some_ pain if they want timely transactions.

[T.Stuart]

mining becomes less and less relevant as bitcoin grows

Sorry if I have misunderstood something but mining is actually necessary to keep the blockchain updated with payments. It is therefore important to factor this into the argument for the future. When Bitcoin takes off as a payments system (both Bitcoin transactions and Fiat > Bitcoin > Fiat [think Bitpay] transactions) then miners are powering the engine that keeps this system going. It will be necessary that they remain profitable in order that they stay in business to power the system - the price of Bitcoins must be satisfactory to the miners - but you should also remember that they will take a share of transaction fees within the system, which should count for more, a lot more, in the future.

No one is guaranteeing miners anything, least of all profitability. If they are necessary and useful, transaction fees will go up to replace the reward Bitcoins lost per block. Note this requires that users must feel _some_ pain if they want timely transactions.

I think miner's profitability will also naturally and intentionally get priced in to Bitcoin if the system keeps going as is.

[Erdogan]

The cost of mining follows price, not the other way around.

But, since this is speculation, as long as enough noobs think the price will double, it probably will. Just not from one day to another. Even the noobs can see this in advance, you OP is one example.

[Romyen]

I am not saying that miners will abandon their mining operation and start buying bitcoins instead due to the halving event. Where did I say that in my original post?

I never claimed that you said it explicitly. There is a huge logical gap in your original post, which you still haven't explained, leaving the reader trying to guess what you mean. Why would the halving event cause the price to double?

Ok, let me try it this way:

supply is cut in half and there is a growing demand for it, so price would go up??? basic economics, no other voodoo.

You seem to be a little dense, and some of the respondents to your posts credit you with more intelligence than you apparently have. I'll take this slowly, and point out why underlying a couple of underlying assumptions that you make are wrong.

1) Bitcoins can be bought from anybody who has them, not just miners. They are a fungible commodity and don't degrade with age or reuse, as does food. Therefore the supply is not cut in half with the halving event.

2) Even if the number of bitcoins put up for sale were halved, the price wouldn't necessarily double. It's much more complicated than that.