In the crypto space there’s a war raging for the top headline: COVID-19 vs. the upcoming BTC halving. It’s a strong debate.
On one hand we have the CoronaVirus.
It’s effect is being felt around the world. Economies are crumbling, jobless rates are spiking with over 30 million people unemployed in the U.S. alone, and stocks are sinking.
The result of such turmoil on the price of bitcoin is easy to see: down, down, down.
After all, how can prices go up if no one is buying? If everyone is spending their savings on basic necessities like bread, butter, and beer, how can they even think of buying any bitcoin?
The knee jerk reaction to this is: bitcoin prices will sink.
But hold the phone.
On the other hand we have the Bitcoin halving.
The bitcoin halving happened in early May, 2020.
It’s an event that happens once every four years, just like the World Cup or the Olympics. And it could be argued that it’s just as significant.
Investopedia gives the easiest to digest explanation for the halving:
"Every 210,000 blocks mined, or about every four years, the reward given to Bitcoin miners for processing transactions is cut in half. This cuts in half the rate at which new Bitcoin is released into circulation. This is Bitcoin's way of using a synthetic form of inflation that halves every four years until all Bitcoin is released and is In circulation."
Before May 2020 the reward for every new block was 12.5 freshly minted bitcoins. Afterwards the reward became 6.25 BTC for every new block. This reward will keep being split in half until the year 2140.
What does that mean for the price of bitcoin?
Well, it’s as simple as supply and demand.
The supply of new bitcoins being mined and sold on the market will be cut in half, right?
Therefore, if demand stays the same, the price will rise.
If demand increases (while supply is cut in half), then price will rise even more!
But what if demand decreases? Well, since supply has also decreased then the logical scenario is the price will stay the same (ie less demand + less supply = same price).
That’s where we could be with the war between COVID and the BTC halving.
COVID will surely cut demand down since millions of people are unemployed and therefore using their savings on stacking food instead of stacking sats. But at the same time the BTC halving is cutting the supply of fresh, new bitcoins.
The net result could be the price stays the same. At least for a bit.
But here’s the kicker: the economy will eventually right itself. People will eventually find jobs and go to work again. Demand will increase. But the supply? The supply will still have been cut in half.
So, perhaps, in a year or two when the forces of supply & demand grow strong again, we could see the price of bitcoin take off like a rocket ship.
Until then, prepare yourself by taking the first steps and learning how to invest in bitcoin.