The much anticipated Bitcoin halving is now a reality, behind us. May 11th, 2020 Bitcoin halved , dropping its 10 minute block reward from 12.5 BTC to 6.25. The result : Bitcoin mining profits, in bitcoin, are now lower and less Bitcoin is entering circulation every 10 minutes increasing Bitcoin scarcity. To add perspective to the impact on scarcity , the amount of bitcoins created per day, after the halving on May 11th 2020, has decreased by 900 BTC . At the current price of $9,000 per BTC, this decrease equates to $8,100,000‬ per day worth of bitcoin.

The previous halving events have been extremely bullish for Bitcoin in the build up to the months before them. The underlying fundamental argument is that : less Bitcoin is being created on a daily basis, lowering the amount of BTC for sale in the market, thus increasing the price. With this dynamic intact, the decrease in coins rewarded to miners is offset by the increase in price per coin as a result of the halving. This dynamic has mostly held well over time and based on the current situation, it is fair to say that for miners to achieve the same profitability as they did prior to halving , miners need Bitcoin price to go higher. However, this argument is also somewhat flawed and while every halving tends to be bullish they aren't necessarily so.

What we need to remember is that the reduced creation of BTC and the lower mining reward has two ways to be offset: either from higher prices of BTC or more efficient mining procedures. Truth be told a lot of work has been done in the latter and we are seeing increasingly more green and energy efficient and low cost ways to support mining, on top of that we are seeing fast improvement in the hardware processors used to mine BTC. This efficiency has reduce the price of mining, one Bitcoin, and thus Bitcoin value is not required to be as high as people are expecting to compensate for post halving mining profit losses.

We believe that the halving event was not only highly anticipated buy largely priced in for the last 12 months. However, the events of COVID-19 leading to the astounding amount of loose monetary policy , huge fiscal spending and economic shift, was not priced in.

The reaction of Bitcoin was to follow stocks upon the initial COVID-19 shock. We believe this dynamic was absolutely normal. When such events happen people scramble for cash and weak hands are out. We actually would argue that overall the decline, while extremely sharp, showed how resilient BTC has grown over the last years and that there are obvious value buyers at the 3-4k range. BitMex hack or no BitMex hack, the world turned around in a day and everything sold off including Gold.

However, once the initial panic was over and we saw the Central Bank action around the world we quickly saw BTC recover to nearly above $10,000. As a matter of fact over the last couple of weeks we have seen BTC slightly more decoupled from stocks. We believe that the real bull case for BTC stems from the Central Bank policy around the world, not the halving, we want to see it act more resilient when stocks drop and less correlated to risk. The first signs are somewhat there which is showing that maybe indeed our dream for a free, fair, unenforceable currency is possible.