2016 has become a year of revival for the bitcoin price.
At a press time total of $640, the price of bitcoin is up nearly 50% from its opening on 1st January. While macroeconomic factors including uncertainty in China and Europe have arguably played a role, there may be no bigger influence than the upcoming halving, a rare network event that will occur this weekend.
While nobody knows for certain how the long-awaited reduction in rewards to miners will affect the network, market experts offered a range of predictions when speaking with CoinDesk on how it may impact the price of bitcoin.
Some forecasted the event would push prices higher, while others expected it to have a depressing effect or no impact at all on bitcoin prices. Market experts also offered a range of predictions for how the halving will affect bitcoin volatility.
For background, bitcoin miners use high-power computers to compete to add blocks of transaction data to the bitcoin blockchain. Every time a miner successfully completes a new block and provides a proof of work, that miner receives a reward. This reward, which was originally 50 BTC, is expected to drop to 12.5 BTC on or around 9th July.
Over time, this reward will continue to "halve", until the network creates 21 million bitcoins, the current cap on how many will be issued.
Market observers have been aware of the upcoming halving for years, a development recognized by Petar Zivkovski, director of operations for bitcoin trading platform Whaleclub.
In his words, anticipation for the event has been "building up over the past few months", which means investors betting on certain expectations will soon meet reality, and readjust positions accordingly.
Price rally predictions
Some market experts have predicted the digital currency will keep rising after the halving.
Among those is Joe Lee, founder of derivatives trading platform Magnr, who told CoinDesk he expects prices to move higher in the days following this event. However, he added that "in the short term", the halving will not impact price significantly.
Investor and entrepreneur Vinny Lingham also expects a price rally should the number of bitcoin owners willing to sell decline. Under these conditions, bitcoin prices should enjoy "slow but steady increases," he said.
In addition, a short squeeze could materialize as a result of some miners coming under pressure, forcing the price to move up rapidly.
Lee told CoinDesk he foresees some "short-term volatility led by speculative trading activity", but emphasized that this development will have "a limited effect on price".
Lingham, however, stressed that "bitcoin is always volatile", adding:
I think that the price of Bitcoin even now very understated and Halving after a few months it should reach the level of 1000-1500 USD. Bitcoin is the future! a new world currency !!
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