While it posted a 90 percent gain on the year, Bitcoin didn’t fare too well in the second half of 2019, retracing by 50 percent from $14,000 to as low as $6,400 as a majority of mainstream asset classes posted astronomical gains on the back of central bank liquidity injections into the market.
Despite this, an array of prominent investors believe the cryptocurrency will begin to push higher in 2020. In fact, one investment firm, run by individuals that used to work at Goldman Sachs among other firms, has suggested that Bitcoin will top $40,000—430 percent above the current price of $7,500—sometime in the coming 12 months. Here’s why they think so.
Bitcoin to hit $40,000 in 2020, investment firm suggests
In less than six months’ time, Bitcoin will see an extremely important event. Known as a “halving” or “halvening”— depending on who you ask—the number of BTC issued per block (every 10 minutes or so) will get cut in half from 12.5 to 6.25, effectively meaning that BTC’s inflation rate will be cut in half.
According to a Medium post written by The Spartan Group, a blockchain advisory and investment firm, this halving will have a decisively positive effect on the cryptocurrency market.
In fact, they predicted on Jan. 5 that in the wake of the halving, Bitcoin’s price will likely hit $40,000.
10 crypto market predictions for 2020 by @SpartanBlack_1 https://t.co/zA8SCaVRyp
— The Spartan Group (@TheSpartanGroup) January 6, 2020
This comes shortly after the chief executive of Nexo, Antoni Trenchev, told Bloomberg that he also expects Bitcoin to enter that range sometime in 2020, specifically looking to the round $50,000 price point. Like The Spartan Group, Trenchev cited the BTC halving as the catalyst that will create such explosive growth in this now-stagnant market.
Analysts say the expectation that Bitcoin will shoot sky-high after the halving makes sense.
Melik Manukyan, a prominent Bitcoin commentator and engineer, recently posted the Twitter thread below, showing that the scarcity of the leading cryptocurrency should lead to dramatic price appreciation with a multi-month lag following the event.
How Bitcoin halvings work and why post-halving rallies have a lag following the event:
1. Demand (bids) is at equilibrium with current avail. supply (asks) and flow (new coins).
2. Bitcoin halves.
3. Demand instantly begins eating into new coins & eventually depletes them.
— Melik Manukyan – Pro Bitcoin (BTC) (@melikmanukyan) December 27, 2019
The engineer remarked that halvings will have a large impact on the supply-demand economics of the BTC market, which should eventually result in prices heading higher to a decrease in mined supply being sold on the market.
The math agrees
What’s crazy is that the math agrees with the lofty predictions and supply-demand dynamics that were aforementioned in this article.
PlanB’s stock-to-flow model, which relates BTC’s market capitalization to the scarcity of the asset, found that the leading cryptocurrency will have a fair market capitalization of $1 trillion following the 2020 halving. This correlates with approximately $55,000 per each coin.
Not to mention, previous halvings were precursors to massive bull runs that brought Bitcoin orders of magnitude higher than it was prior to said bull runs.
Posted In: Bitcoin, Analysis, Price Watch