Can halving the block reward actually reduce the price?

[cafucafucafu]

The conventional thought is that the next block halving will increase the price. However could this be completely wrong since if the miners will be getting less rewards, they will be dumping more and also shutting down their machines. We have seen theories that the price drop in recent months is due to miners not holding. Thus if the reward size is smaller then there is less incentive to hold.

[Kazimir]

The conventional thought is that the next block halving will increase the price. However could this be completely wrong since if the miners will be getting rewards, they will be dumping more and also shutting down their machines. We have seen theories that the price drop in recent months is due to miners not holding. Thus if the reward size is smaller then there is less incentive to hold.

Eh, no. If miners don't want to hold, after the block halving there are less coins for them to dump.

[Possum577]

If miners slow down their mining supply will go down and if demand remains the same and supply goes down the price will go up.

The reacting of the halving will be VERY interesting. The problem is that it might be a very slow exchange OR demand my drop...

[odolvlobo]

The block halving event itself will have no affect on the price. After all, nothing happened to the price at the last block halving.  Keep in mind that the supply of bitcoins from mining is small compared to the overall supply of bitcoins. A drop in the supply of bitcoins by 1800 bitcoins per day is not really very much.

On the other hand, fewer new bitcoins means less inflation and the price will rise higher as a result of increased adoption, over the long term.

[cafucafucafu]

The conventional thought is that the next block halving will increase the price. However could this be completely wrong since if the miners will be getting rewards, they will be dumping more and also shutting down their machines. We have seen theories that the price drop in recent months is due to miners not holding. Thus if the reward size is smaller then there is less incentive to hold.

Eh, no. If miners don't want to hold, after the block halving there are less coins for them to dump.

This all depends on what proportion they are dumping right now.

[jonald_fyookball]

The conventional thought is that the next block halving will increase the price. However could this be completely wrong since if the miners will be getting rewards, they will be dumping more and also shutting down their machines. We have seen theories that the price drop in recent months is due to miners not holding. Thus if the reward size is smaller then there is less incentive to hold.

Interesting theory, but I believe miners are already "not holding".
I say this because the difficulty and hashrate has essentially flatlined.

This means more mining power isn't being unleashed
because it's not profitable to do so, which in turn
means miners are being forced to invest almost
all their revenue into mining just to obtain a slim
profit margin.  They can't afford to be holding
anything else.
 
So, given the same demand for new coins,
and half the supply, the price should theoretically double.


 

[Taras]

I wonder why satoshi decided on this algorithm. These sudden drops could be dangerous.

50 50 50 50 50 50 ... 50 50 50 25 25 25 25 25 25 25 ... 25 25 25 12.5 12.5 12.5 12.5 ...

What's the advantage to choosing a stairway for the block reward over a smooth curve? Nice round numbers? Easily calculable final cap?

[jonald_fyookball]

I wonder why satoshi decided on this algorithm. These sudden drops could be dangerous.

50 50 50 50 50 50 ... 50 50 50 25 25 25 25 25 25 25 ... 25 25 25 12.5 12.5 12.5 12.5 ...

What's the advantage to choosing a stairway for the block reward over a smooth curve? Nice round numbers? Easily calculable final cap?

There's several security considerations which make
Satoshi's scheme a good idea.

Andrew Poelstra has identified them in this paper:
https://download.wpsoftware.net/bitcoin/alts.pdf

[insidertradingeverywhere]

I wonder why satoshi decided on this algorithm. These sudden drops could be dangerous.

50 50 50 50 50 50 ... 50 50 50 25 25 25 25 25 25 25 ... 25 25 25 12.5 12.5 12.5 12.5 ...

What's the advantage to choosing a stairway for the block reward over a smooth curve? Nice round numbers? Easily calculable final cap?

Exactly. Good equestion. No advantage there. It's pretty clumsy.
Coders are no economists obviously. Bitcoin is much more volatile than would need to be.

[Q7]

With less supply introduced daily, this should have a positive impact on the price to slowly bring it up in the long run if there is no external factor like manipulation. But I don't expect it to change so suddenly or so drastic once halving occurs considering the size of the market which is so big with only less 1800 introduced per day. Also there are many factors which can come into play to affect the price.

[insidertradingeverywhere]

Now, we'll first hit rockbottom and then stagnate until halving. So don't get all fuzzy.

A pump and dump could be expected for the halving because whales like excuses.
Any real demand isn't created with a halving.

[Madness]

The conventional thought is that the next block halving will increase the price. However could this be completely wrong since if the miners will be getting rewards, they will be dumping more and also shutting down their machines. We have seen theories that the price drop in recent months is due to miners not holding. Thus if the reward size is smaller then there is less incentive to hold.

Of course not mate .
Logically it will rise , because when the next halving block reward happens it will be 12.5 BTC instead of 25 BTC so less Bitcoin = more value obviously

[inBitweTrust]

The conventional thought is that the next block halving will increase the price. However could this be completely wrong since if the miners will be getting rewards, they will be dumping more and also shutting down their machines. We have seen theories that the price drop in recent months is due to miners not holding. Thus if the reward size is smaller then there is less incentive to hold.

Miners already have to dump a majority of their coins to pay for ASICs, electricity, and support. There are extremely competitive tight margins on mining.
If demand remains level you hypothetical should see market price double within a few months. In reality human psychology and market expectations may cause this bubble to occur
earlier in anticipation and speculators may drive this price up at least 4-5 times rather than just 2x. One should expect a crash months after any bubble if it grows 4-8x in value.

Historically, all crashes have landed on higher supports before as well. I.E.. previous support in 2013 = ~100 usd before bubble, and new support between ~270-320usd in 2014-2015.

[P4man]

The block halving event itself will have no affect on the price. After all, nothing happened to the price at the last block halving.  Keep in mind that the supply of bitcoins from mining is small compared to the overall supply of bitcoins. A drop in the supply of bitcoins by 1800 bitcoins per day is not really very much.

+1

But this reward halving will be different than the previous one; not for the price, but for the network. When the previous halving occurred, mining was operationally profitable for most people, before and after the event, next to no one shut down its miners, the only problem for miners was recovering their investment.

This time, it will be very different, mostly everyone is  already and will be very close to operational profitability before the halving. So it will be an interesting game of chicken who turns off/sells his mine first, I expect wild fluctuations.

[teukon]

In a market of sufficiently skilled traders and speculators the halving will have no direct impact on the price at all.  This is because while monetary inflation will indeed drop sharply, there will be speculators that accumulate bitcoins before the drop and release them after the drop to compensate for this.

Unfortunately, the Bitcoin market is full of amateurs.  While there will undoubtedly still be a few keen whales out there that understand the basics of this halving mechanic and wish to clean up, they'll be confronted by an irrational mass of traders which, taken together, may represent a substantial chunk of trading volume.  The real game is in predicting and reacting to these traders and their sentiment.  Perhaps the price will plummet as everyone tries to buy bitcoins now and dump them after the halving.  Perhaps the price will skyrocket as everyone buys in on the news that inlfation has just halved.  This kind of uncertainty can give rise to volatility, even before the event.

One final indirect factor the halving may have on the price is in how a sudden drop in mining reward affects miner's willingness to mine.  If worldwide variance in mining efficiency (GH/s versus costs) is large at the time then the subsidy halving shouldn't cause any substantial block-frequency problems.  If variance is very low (only the most efficient miners are running) then the drop may make most/all miners instantly unprofitable and cause real transaction processing problems (as they drop out) which will mar the image of the network and hurt the price.

[Jamie_Boulder]

Miners hoarding coins isn't a good thing, we want them to dump.

Regardless of the influence it has on price (not saying it will be negative).

[desired_username]

Miners hoarding coins isn't a good thing, we want them to dump.

Regardless of the influence it has on price (not saying it will be negative).

Not just miners, but all early adopters. Coin distribution cannot get better without whales selling/investing majority of their holdings, which is a requirement for stability.

This is why I'm skeptical of the hyped winklewoss ETF. It brings in only more speculators which is not really optimal at this stage.

There would be a lot more and better ways to use 100K btc and help establishing the currency.

[jonald_fyookball]

@teukon good thoughts, however, I don't know that those dynamics will fully offset the effects of halving the supply.  I tend to think they won't.  I'm also hoping  there won't be transaction processing issues as the cost of the gear itself is still a substantial part of mining costs.

[Slunt]

I cannot think of a valid reason the block halving will do anything other than increase the price. The basic economic theory of supply and demand should come into effect here. I just hope there is a bigger demand for them then than there is today - which I think there will be - and then we should be good. It's exciting to wait and see that's for sure.

[inBitweTrust]

Another thing to consider is the psychological effect that will be created if Bitcoin crosses over the 1100-1200 thresh-hold a second time(This time for real, as last price was artificially created by willy and markus). Us old-timers know of the bubbles and subsequent crashes and are comfortable with these growing pains for an emergent technology, but with most of the public they aren't so sure that Bitcoin will ever reach new heights again. Crossing that barrier a second time will give confidence that the Austrian model of disinflationary currency does have validity and bitcoin is a good store of long term value.

Expect to see a spike in adoption as people grow more confident with Bitcoin once this happens which will further have a feedback loop of self re-enforcing behavior.