Meltem Demirors says that Bitcoin halving will not boost BTC prices
The more BTC turns into an investable asset, the more it deviates from its value
No rally in 2020 could spell trouble for miners
Bitcoin (BTC) hodlers, or those who prefer to own the popular cryptocurrency for the long run,areexpecting for the halving event scheduled next year to be a full-on bullish event. These people could even havepurchased BTC at exorbitant prices and are holding on for dear life.
These Bitcoin hopefuls are expectant that a rallywould lift the value of whatever amount of cryptos they have in their wallet. However, to Meltem Demirors, the Chief Strategy Officer of the digital asset management firm Coinshares, thehalving event, tentatively scheduled on May 14 next year, will do nothing for BTCs prices.She offered her reasons in a series of tweets.
Demirors believes that due to the robust derivatives, most investors would trade that financial instrument rather than the underlying asset. This was seen in 2017 when CME Group launched its Bitcoin futures contractwhich led to the break off its highest recorded price at $20,000 that preceded a 2018 bear market. This year another futures contract for Bitcoin debuted in the market inBakkt, a joint venture of ICE, Microsoft, and Starbucks.
When investors flock to derivatives, according to Demirors, producers lose their power to set prices.
Demirors tweeted, 2/ A topic thats been studied in other commodities markets is how pricing is set. Bitcoin is, arguably, a digital commodity. Normally, producers set the price of a commodity (classic S = D = P from Econ 101) when derivatives take off, producers lose the right to set prices.
Demirors also posted a chart of oil as an example wherein, for the last 20 years, the commodity was chiefly driven by speculation on Brent crude futures. Her last point was that Bitcoin becoming more of an investable asset would push itaway from its real value.
If what Demirorsis saying is true, then that could spell trouble for BTC miners. A report by LongHashcould vouch for Demirors prediction that the halving will not boost Bitcoins prices, but the blockchain data and news platform doesnt echo similar points. Instead, LongHash stated that there is no evidence that the 2012 halving caused the 2013 rally, and the 2017 bull run wasnt caused by the 2016 halving but by the ICO boom.
If both predictions become true and prices stay the same — or worse, lower — then miners would have to depend on transaction fees to sustain operations further into the future as Bitcoin rewards keep slimming once every four years. The whole industry is already in pain, according to LongHash,and no rally would force smaller miners to tap out.
Can bitcoin surpass the dollar? Here, an image of bitcoin and U.S. currencies is displayed on a screen as delegates listen to a panel of speakers during the Interpol World Congress in Singapore, July 4, 2017.
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