Beginner's misconceptions about Bitcoin halving

[Yogee]

These are just some of the common misconceptions I read here in the forum and other cryptocurrency related platforms. To be honest, I used to think the same until I read more.

1. The supply will decrease

This is obviously not the case. The supply will continue to increase but at a slower pace until we reach the cap which is approximately 21 Million.

To better understand this, we can take a look at the number of Bitcoins produced or mined and added to the supply per day since the beginning:
- at 50 reward/block, there were about 7,200 new Bitcoins
- at 25 reward/block (1st halving), there are about 3,600 Bitcoins 
- at 12.5 reward/block (2nd halving), there are about 1,800 Bitcoins
- at 6.25 reward/block (3rd halving), there are about 900 Bitcoins

There are 24 hours in a day, 60 minutes in one hour, and it takes approximately 10 minutes for 1 block. Simply put, the computation is 24*60/10*block reward.

As you can notice, it is only the number of Bitcoins mined per day that decreased per halving and not the total supply. That trend will continue until the last one is mined.


2. The price will increase

This may appear true if you look at what happened in the past halving but this is not something the halving can dictate. The truth is halving will continue to happen every after 210,000 blocks regardless of its monetary value. This "price will increase" is usually the hype created by many speculators aimed at attracting new investors. It is the market that determines the value of Bitcoin. When a buyer and a seller agrees on a price, then that's the price.

There are also people who say that because of the halving, Bitcoin will become more scarce and expect the price to reach hundreds of thousands. Obviously, it won't be more scarce like what I explained above. It is my opinion that for the price to reach hundreds of thousands, there has to be an increase in demand too and not just a limited or finite supply. There has to be a factor that would drive new investors to buy. It could be a new development, an event, or something else.


*****
Add more if I miss something and correct any of my points if you think it's inaccurate. Let's discuss.

[GreatArkansas]

2. The price will increase
This may appear true if you look at what happened in the past halving but this is not something the halving can dictate. The truth is halving will continue to happen every after 210,000 blocks regardless of its monetary value. This "price will increase" is usually the hype created by many speculators aimed at attracting new investors. It is the market that determines the value of Bitcoin. When a buyer and a seller agrees on a price, then that's the price.
(....)

+1 . Some of the people are expecting the meaning of scarcity or their knowledge from their ECONOMY 101 subject, which says "If the supply will decrease, the price will increase", "if the demand will increase, the price will increase", or "if the supply is high, but demand is low, the price will decrease".
I love the way what happened on this recent block halving on Bitcoin, it's kinda neutral, we saw a pump before halving and after that, dump also, which for me it is just a pullback or price correction.

[Pffrt]

1. The supply will decrease

The supply people are talking about is the usual supply of BTC in the market. Miners sell the BTC to maintain their cost. Before halving, they could have sold 12.5 BTC per block for example which would be available in the market while now, they will be able to sell 6.25 BTC. That's saying, the supply will decrease. I got your point also.

2. The price will increase

The price thing is just a speculation for sure. It is expected that due to the less supply of BTC in the market, there will be a gap between supply and demand (which will not decrease). It may cause the price pump.

[hd49728]

Price will double after the halving is always the misconception for crypto newbies. I am sure halving has its effects positively on price in the long run. Nevertheless, to say it will help price double-increases after halving, it is so wrong. About all time highs, bitcoin has never set up its new all time highs, or even closely reach its previous all time high too soon after halving days. This time, do you think bitcoin will take off and reach $13.4 k then $19k level soon? I don't think so, honestly with all of you.

[Ryker1]

[snip]
The price thing is just a speculation for sure. It is expected that due to the less supply of BTC in the market, there will be a gap between supply and demand (which will not decrease). It may cause the price pump.

Well, that correct. Supply and demand have a huge factor on the bitcoin's price if we will have a smaller number of available bitcoins due to halving and the demand will still be the same or will rise then a scarcity in bitcoin can cause pump on the price but if we have less available bitcoins and less rate in demand then the price will not change at all or may even cause a dump on the price. Perhaps halving will give a huge impact on bitcoin's price because it will determine the supply of available bitcoins in the market. Indeed, --I perfectly understand your point in this thread however we just need to realize that halving will have a great effect in the future if bitcoin.

[ShowOff]

As you can notice, it is only the number of Bitcoins mined per day that decreased per halving and not the total supply. That trend will continue until the last one is mined.

This is the main point. Scarcity occurs not in the total supply of bitcoin, but in prizes that are mined. Herein lies the beginners mistake so far in understanding halving, maybe. Reducing the amount of bitcoin that miners get for each block is also a scarcity for the miners themselves and will also increase the difficulty.

2. The price will increase

This may appear true if you look at what happened in the past halving but this is not something the halving can dictate. The truth is halving will continue to happen every after 210,000 blocks regardless of its monetary value. This "price will increase" is usually the hype created by many speculators aimed at attracting new investors. It is the market that determines the value of Bitcoin. When a buyer and a seller agrees on a price, then that's the price.

Hype will affect the market, but there are many other things that can affect the market and that is like the development, adoption and regulation of a country. An increase in market demand shows that an increase in the adoption of bitcoin and the entry of new investors. The price of Bitcoin is of course an agreement between buyers and sellers, the more demand the higher the price and vice versa the price will go down when many people agree to sell at a lower price.

Fluctuations occur because bitcoin has become an asset that can be traded at high prices, people can still make fluctuations only if they have large amounts of bitcoin and of course its like a whale game.

[Stedsm]

I believe it's not so easy for the price to increase even post halving because the miners who left the network based on the current price and the decreased rewards which seemed unprofitable (and are actually unprofitable for them right now) look like they are dumping their coins on the current hodlers/ buyers who are strongly trying to push up the price.

[nakamura12]

The supply people are talking about is the usual supply of BTC in the market. Miners sell the BTC to maintain their cost. Before halving, they could have sold 12.5 BTC per block for example which would be available in the market while now, they will be able to sell 6.25 BTC. That's saying, the supply will decrease. I got your point also.

I also think that way since the bitcoin supply is always increasing day by day but as the day goes by the amount of btc that will be increase per day will decrease. Newbies should be aware of this. Supply and demand do have an effect om bitcoin market but mostly the reason why the price is increase is when there is an event for example that can start a hype.

[squatter]

2. The price will increase

The other side of this misconception: "The hash rate will crash." Lots of people believe that if the average cost to mine a bitcoin becomes greater than the price, hash rate must drop to account for it.

The truth is that not all miners have the same cost -- not by a long shot. The industry is increasingly moving towards efficient grid use that allows for extremely low energy costs. Here is one example. Mining efficiency also plays a major role. Smaller miners with higher electricity costs and those running inefficient miners like S9s are shutting down, but more efficient operations are also coming online.

Since the halving about 32 hours ago, the network has seen one block every 10.38 minutes. That's slightly below the target time and the previous rate, but certainly doesn't indicate the 30-35% drop predicted by BitMEX Research or many other hash rate pessimists.

[smyslov]

If the adoption and supply is greater than current supply and demand then the price is likely to increase, the supply is still going up but not the kind of supply that the market is receiving coming from miners, and if adoption is in fast tract the incoming supply cannot keep up with the demand, as long as Satoshi if he is alive do not dump his share.

[Yogee]

2. The price will increase

The other side of this misconception: "The hash rate will crash." Lots of people believe that if the average cost to mine a bitcoin becomes greater than the price, hash rate must drop to account for it.

The truth is that not all miners have the same cost -- not by a long shot. The industry is increasingly moving towards efficient grid use that allows for extremely low energy costs. Here is one example. Mining efficiency also plays a major role. Smaller miners with higher electricity costs and those running inefficient miners like S9s are shutting down, but more efficient operations are also coming online.

Since the halving about 32 hours ago, the network has seen one block every 10.38 minutes. That's slightly below the target time and the previous rate, but certainly doesn't indicate the 30-35% drop predicted by BitMEX Research or many other hash rate pessimists.

Thank you. I also wanted to touch this but I still have a little understanding about mining related topics. With what you said, am I right to assume that this is not just a beginner's misconception? It seems that some more experienced or knowledgeable investors have different opinions on this.

The hashrate did drop but not directly because of the halving. It's more likely an effect caused by the reduced mining rewards and the leaving of less efficient miners.