We now have sub 400 days to the Bitcoin Reward Halving (Highly relevant for long term prices)
Screenshot from: https://bitcoinblockhalf.com
On the 24th of May 2020, we are expected to get the next Bitcoin Reward Halving to 6.25 coins (from 12.5 currently). Why should you care?
The short answer:
Supply and demand. We are currently generating 1,800 new Bitcoins per day currently worth around 9 Mio USD and that will drop to 900. Assuming that minors sell a proportion (for instance half) of their mined coins to pay for their operations, this sell pressure will instantly be cut in half. If the miners today are selling 50% of their coins there is currently a need of 4.5 Mio of dollars buying lest the price should fall. After a halvening, this would fall to 2.225 Mio of daily sell pressure.
Longer answer:
The inflation of Bitcoin will be reduced, increasing the stock-to-flow ratio (how much there is vs how much there is produced). Today, roughly 17.65 Mio. Bitcoins have been mined. Currently, one year of mining will yield 0.657 Mio. Bitcoins or a ratio of mining to the stock (stock-to-flow or SF for short) of ~ 26. An SF of 26 is actually better than most metals and comparable with silver. It is still only half that of gold though. At the next halvening, we should have mined around 18.3 Mio Bitcoin. With the production falling to half that, we should expect an SF of 55.7. This is getting comparable to gold which has an SF of 62.
Does this sound too good to be true? Unless something goes fundamentally wrong with the technical aspects of Bitcoin it is all but a mathematical necessity.
If you want to spend 10 minutes to learn more, I can recommend this excellent post:
https://medium.com/@100trillionUSD/modeling-bitcoins-value-with-scarcity-91fa0fc03e25?fbclid=IwAR1UbvVLnWxkFcBm12U9fB86L-4VyWLHIg6jv11UZldSJNTqnuYbDkEWnxQ
If you have several hours, I can only recommend Associate Professor of Economics Saifedean Ammous' book The Bitcoin Standard: The Decentralized Alternative to Central Banking:
https://www.amazon.com/gp/product/1119473861/ref=as_li_tl?ie=UTF8&camp=1789&creative=9325&creativeASIN=1119473861&linkCode=as2&tag=saifedean-20&linkId=553d55d8f25cbfc8923c63ea38d2c1d4
Of course, this tells us very little of where the price will move in the weeks or months to come. But I know that I won't be caught without a BTC position before the next halvening.
As always: Good luck to all of you and take care.
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