Bitcoin halving incoming
And unsurprisingly it's a sell-the-news event.
But if we're lucky it'll be another V-shaped recovery.
Just need to make it past April.
This is neither here nor there.
The real question I'd like to pose here is: Does the halving get stronger or weaker?
On many occasions I've made claim that the halving doesn't even matter anymore. This makes sense on a certain level because the network has already minted 19.7M coins out of 21M. Who cares about the remaining 1.3M? That's only 6% more of the supply. This is a rounding error when compared to the exponential gains of crypto. There's just as good of a chance that much Bitcoin gets lost forever during that time to offset the inflation rate.
However, this logic has a lot of holes in it.
For starters, almost all of Bitcoin's inflation gets dumped on the market (whereas most other BTC gets HODLed). Mining is a razor-thin profit-model business. In places where energy is more expensive it is impossible for Bitcoin mining to be worth it unless the heat from the miners is repurposed (example: heating pools/homes). Within this context we should always care about the halving event because in theory the halving event is going to cut Bitcoin's energy consumption in half.
Unfortunately this is also an incorrect assumption and nothing is ever as simple as these reductive takes. We tend to completely ignore all this money we are paying in fees. We always complain about the fees when paying them but then we never calculate that fee into the block reward. Classic degens.
When network usage is high the fees on a block can easily exceed 1 BTC. This is going to end up being a huge amount going forward. In four years the next halving will bring us down to a block reward of 1.5625 BTC. At that point some of the blocks will get paid more from fees than from the emission rate. That's when things will start to get crazy.
But what if we measure the value in USD?
This is something I've never done.
Let's grind some numbers, shall we?
| year | reward | value |
|---|---|---|
| 2012 | 25 BTC | ~ $0.3k |
| 2016 | 12.5 BTC | ~$8k |
| 2020 | 6.25 BTC | ~$50k |
| 2024 | 3.125 BTC | ~$200k |
| 2028 | 1.5625 BTC | ~??? |
Uh, wow...
So we can see with this new information that the halving event could still be creating an exponential affect on the network even though the raw amount of Bitcoin involved dwindles in half every four years. The USD value of Bitcoin increases by quite a bit more than double every cycle. This could be highly significant to the discussion.
If we assume that Bitcoin is doubling in value every year on average then the halving event is only going to negate one of those years. Four years of doubling is an x16. Losing one of those years is an x8. Given this napkin math it's relatively safe to assume that the halving event is getting exponentially more powerful when measured in USD even though the BTC measurement would draw us to the exact opposite conclusion.
The only way this wouldn't be true is if BTC stopped doubling in value every 4 years (which is +20% per year). We are way higher than that target currently and I've never seen anyone make predictions that low over the long run. This makes sense because those types of gains wouldn't be much better than the stock market, which as we all know is quite corrupt and ridiculous. It's shouldn't be hard for BTC to continuously outperform that on the 4-year cycle average.
It's possible that the next time we are "halving" this conversation in 4 years that the amount of USD being evaporated by the event is somewhere around $1M per block ($144M per day). After all would a BTC spot price $640k in four years really be so unbelievable? That's what it's going to take to hit that target. An x10 in four years isn't that unrealistic for an asset like this, especially in the current environment of institutional adoption.
So the question we have to ask is...
Does the USD measurement matter?
USD as the linear measurement.
Unit-of-Account is a bit of a weird concept. What does it mean when we measure value in this way? On a very real level the fiat value of things is how we define the resources we have and compare them to what society has to offer us in exchange for that value. If the amount of societal value for Bitcoin is exponential over time, and the amount of dumping removed from the system is also exponential that could be pretty significant even if it's a tiny amount of BTC on future halvenings.
On another very real level the halving event should not be looked at as a money making opportunity. That's a greedy and selfish way of looking at the situation. Rather we should be looking at it in terms of sustainability. Overpaying miners is a waste of resources, not just in terms of value dilution, but the energy expenditure is arguably much worse.
I'm on record as claiming the halving event doesn't need to exist... and it doesn't... if the only requirement is number go up. However, it absolutely does need to exist if we want to avoid wasting a bunch of energy for literally no reason. Bitcoin's "security team" doesn't require more incentive. Bitcoin has already reached a point in which double-spend attacks are not economically possible practical.
Even if an entity had the technical power to get it done they'd never be able to trick someone else into exchanging billions of dollars for vaporous BTC and then also avoid getting sued internationally. The network has gotten so large that bad actors would be punished at the federal level... in addition to the fact that no one is going to exchange billions of dollars in value at a time within half an hour without any recourse. Bitcoin is now too big to fail in the way that everyone has been trained to think it can fail.
Conclusion
Is it significant that the USD value of halving event reductions is going up exponentially? Probably. It's just unclear what kind of assumptions we can make from this mathematical fact. Does this allow BTC to continue moving up in value exponentially even though the actual amount of BTC involved slowly approaches logarithmic zero? Definitely maybe!