The Bitcoin halving was widely celebrated by Bitcoiners last Saturday. But why exactly? Because the supply is reduced and this can potentially push the price up. Nathan Labbe shares on his LinkedIn why he thinks this is nonsense.
His argument summarized? The role of the supply of Bitcoin is no longer interesting for the price, it is only about the demand for Bitcoin. Demand is elastic, supply is not.
Supply is known, demand varies
What exactly is that halving? To create new Bitcoins, computers must solve complex puzzles. As a reward they receive Bitcoins for this. This reward is halved once every four years. In April 2024, the reward went from 6.25 Bitcoin to 3.125 Bitcoin per solved puzzle.
But this is known. Everyone always knows how many Bitcoins there are and how many more are coming. The supply knows no secrets and is static. The only thing that varies is the demand.
Nathan Labbe says that only the variation in demand causes a moving Bitcoin price.
Bitcoin supply has been low since 2020
He has more arguments for this. First, because the supply of new Bitcoins has been low for a while. In 2020, 88% of all Bitcoins had already been mined, and in 2024 that will be 94%. This means that only 6% of all Bitcoins have been released in the last four years.
Bitcoin’s price was not determined after the 2020 halving due to a lack of new coins and that certainly will not happen after last Saturday’s halving.
Why are there price fluctuations if supply is linear?
His second argument is that the demand for Bitcoin is much more important for the price than the supply. Just look at the fluctuations of the past four years: significant increases were followed by sharp decreases. This pattern does not fit with a linear decrease in new Bitcoins, he says.
This is a fluctuation in demand, not supply. That offer is always the same, transparent and predictable.
The author further warns against fake experts: “Many people who are now shouting that the halving will change everything were not even there in 2020. So don’t be fooled by overly rosy predictions.”
Rewarding miners no longer has any influence
A discussion arose in the comments on the Linkedin post:
Some think that the creator of Bitcoin, Satoshi Nakamoto, may have already anticipated that the rewards for miners would no longer have much influence on the price in 2024. Perhaps that was the reason behind the plummeting rewards.
This would mean that Satoshi wanted to ensure that the network would attract many miners with attractive rewards in the beginning.
