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Issue #336: Are reward halvings priced in?

Oct 10, 2018
Marty's Ƀent

Issue #336: Are reward halvings priced in?

For some reason, there has been a lot of chatter on crypto Twitter about the effects of Bitcoin block reward halvings on price and whether or not they are "priced in" prior to or following the supply shock. For you freaks who do not know this, every 210,000 blocks the amount of bitcoin that a miner is rewarded for successfully adding a block to the chain gets cut in half. The initial reward was 50 BTC/block and has since been cut to 25 BTC/block and currently sits at 12.5BTC/block as we sit at block 545,163. Once block 630,000 is mined, the reward will be cut again to 6.25 BTC/block. As we approach another halving (about a year and a half out) the great debate begins again. Are these supply shocks already priced in?

I don't think so and it's a combination of two things; what Saifedean describes in the above tweet, that it's impossible to be priced in because most of the total addressable market doesn't even understand what Bitcoin is yet, let alone the supply shocks that are halving events. And I would argue that people who are relatively new to Bitcoin and have an idea of the halving events still don't understand the abruptness of the change. Unless you've been through one before, you don't really understand the FOMO that begins to spread as soon as the halving occurs. The crunch is real, especially for miners and OTC desks that help miners liquidate the BTC they earn. I believe that these entities start demanding higher prices to cover costs and this couples with the market narratives of "the world getting closer to a world where the 21 millionth bitcoin has been mined" to create massive FOMO events in the six months to a year following the reward drop.

At the end of the day, this is a silly debate IMO because, as Saifedean points out, information is never completely/evenly distributed, so it may be impossible to have future events "priced in". Nonetheless, I like to see people thinking about these things as they draw more attention to Bitcoin. But, again, nothing anyone should waste too much energy on.

Final thought...

What do you think Bob Marley would be like today if her were still alive?


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