Cryptocurrency is the out of control child in the investment world. Its prices fluctuate by the minute and have been deemed one of the riskier investments to be made. Even Warren Buffet, one of the richest man in the world, is discouraging people from investing in it.
But every four years, the price of bitcoin will be cut in half, in a bid to stabilize the crypto market. Mining for the currency will only yield 50 percent, which will reduce the number of coins in the market and preventing it from going through price inflation.
But stabilizing the crypto market brings along another factor: It will attract more investors.
eToro analyst Simon Peters said, “During and after the first halving in 2012, the key investors were those already involved in the asset class. The bitcoin investor base was almost exclusively made up of those in the know; blockchain scientists and data programmers as well as libertarians interested in the idea of a monetary system outside of political influence and central bank control.”
When bitcoin was halved in 2012, the world saw the price of a one coin drop to US$13 and peeked at US$230 in just six months. Four years later in 2016, the coin was halved again, and that’s when people started to pay more attention to it. Thus, the price rocketed to about US$9,800 per coin.
This was one of the reasons cryptocurrencies was put on the map, and more people were looking at ways to sink their hands into this digital gold mine.
During the halving, eToro saw that 50 percent of the investors in Malaysia were millennials.
Peters added, “Alongside the computer programmers and blockchain scientists were ordinary people, from management consultants to electricians and hairdressers. Suddenly bitcoin was on everyone’s lips.
“Since then, the crypto industry has matured, with talks of regulation, institutional investors entering the market and even central banks expressing an interest in the asset class. Combine this with another price rally expected after the 2020 halving, and we could be on the precipice of crypto becoming a mainstay of investors’ portfolios in the same way as stocks, bonds and commodities.”
eToro believes that with every halving of bitcoin, its technology and pricing will improve, as well as increase in adoption and regulation.
The halving will happen on May 12, which could see the price of a bitcoin drop to about US$3,000 from is the current price of US$9,900.
If you plan to invest in bitcoin when the halving happens, do use services that have been endorsed by your country’s government, and only invest what you’re willing to lose.