Bitcoin traders and investors have long been looking forward to the next bitcoin halving, scheduled for May 2020.
Bitcoin halvings, where the number of bitcoin rewarded to miners are cut by half, are generally expected to have a significant effect on the bitcoin price–though no one knows exactly what that effect will be.
Now, the chief executive of China-based bitcoin mining giant Bitmain, Jihan Wu, has warned the next bitcoin block reward halving may not spark a bitcoin price bull run, as many hope.
The last bitcoin halving, sometimes called a halvening by the bitcoin and cryptocurrency community, happened in July 2016, some six months before bitcoin’s epic 2017 bull run.
However, the bitcoin, cryptocurrency and blockchain industry has matured since then, with the traditional financial industry and some of the world’s biggest technology companies taking an interest in bitcoin, though mainstream adoption has remained elusive.
“We are currently in a short-term correction of price,” Wu said at the World Digital Mining Summit in Frankfurt, Germany, last week, according to reports.
“Having a long-term perspective is significant. If bitcoin’s price remains unchanged after halving, the efficiency of existing [mining] equipment must be improved to balance efficiency and computing power.”
The bitcoin price dropped suddenly at the end of last month, falling from its recent plateau of around $10,000 per bitcoin to under $8,000, with many putting this down to the lackluster early performance of the hotly-anticipated Bakkt bitcoin and cryptocurrency trading platform–though some have suggested other reasons for the price plunge.
In May next year, unless wild swings in the mining hashrate change anything, the coin reward for mining new bitcoin blocks will drop from 12.5 bitcoin to 6.25 bitcoin.
Miners, who spend huge amounts of money on cutting-edge equipment to give them an advantage over rivals, as well as the energy costs associated with powering their processors, could be in for a shock if the bitcoin price fails to rally when the mining reward halves.
“There are many uncertainties, but now is a good time to invest in crypto mining,” Wu added.
Earlier this year, U.S. venture capitalist Alyse Killeen, managing partner of StillMark Capital, warned the bitcoin market is heading for a “supply shock” due to the coming halving.
“What I think might be happening is an anticipation of a coming supply shock in 2020,” Killeen told Bloomberg, a financial newswire. “In 2020 we’ll have just half the daily supply of bitcoin that we do now.”
Elsewhere, one of bitcoin’s biggest rivals, litecoin, went through a halving event earlier this year, which saw its price surge in the lead up to the halving, only to fall back in the aftermath.