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[Music] hey this is David for big bits and in this video we’re going to try to answer the question of whether or not the 20/20 having and those coming along past that are priced in to the actual price of Bitcoin on the market and I have as some good news I have some bad news the answer is both yes and no and it’s a complicated question with a complicated answer and I’ve kind of laid it out in this response to another person on crypto Twitter who you may or may not know of if you follow that stuff but when you’re talking about whether the halving is going to have an impact on the price of Bitcoin there’s a lot of things that you can look at but what’s really happening as people are buying and selling Bitcoin that’s what determines the price on the market these external factors can cause people to buy or sell but what actually influences the pirate price of course is those people buying and selling so we look at the inflows and outflows inflows is money coming in which would raise the price and money coming out which would of course lower the price and there’s a lot of different ways that money comes in and goes out let’s take a look at how the money goes down or how the price goes down excuse me and the money comes out and the first thing we’ll notice is the minor operations the hardware that they use is very expensive they well the bigger people make their own equipment so they’re probably operating at much better profit margins but it does still cost electricity to run the devices so even if you have your equipment paid off you’re still having to pay for the electricity costs to have the equipment running so the rewards are 12 and a half Bitcoin per block at the current moment and after the 2020 having it’s going to be six point two five now in order for these people to justify as a business mining Bitcoin at such large scale they have to cover their operational cost in order to do so that means they have to sell Bitcoin and that usually means they sell most if not all of their Bitcoin to cover their cost unless they are already operating in profit and they want to hold Bitcoin speculatively hoping that the price goes up from where they mined it at in profit so I hope that makes sense we’ll take a look at this a little bit more later on but the other pressure down or just general bears people who do not think that Bitcoin should be priced as high as it is and there’s those who are taking profit people who bought Bitcoin a long time ago and have realized now you know hundreds of percent thousands percent gain they’re just taking profit they’re selling it to take their money and do whatever they need with it start their own business you know pay for school do whatever they need to buy a house buy a car those sort of things and there’s probably more and there’s also constant pressure up and when I say Hodler is here that’s obviously a lingo for people who just hold their Bitcoin and don’t plan on selling it but those people also tend to routinely buy Bitcoin at a regular pace you might consider this dollar cost averaging but to people who truly believe in that ha telling mentality they see that as really just transferring your wealth into Bitcoin and many of them don’t even plan to sell at any point they plan to use the Bitcoin hoping that its value rise it’s not just its price now there’s also Bulls people who believe the price is going to increase who do plan on selling later that would be those taking profit at another point in the future and there’s also speculators just people who just want to get into Bitcoin because they think they should for whatever reason and bulls and speculators you can say they’re the same thing but really this is what we’re looking at we have this constant pressure up on the price in the market from people just buying Bitcoin and we also have the constant pressure damn from the miners selling people taking profit and people just generally bearish on Bitcoin and you can also discuss there’s also impacts on the price and the market from these derivative products where people can actually short Bitcoin with margin long Bitcoin with margin there’s a lot of different variables and it’s important to acknowledge that all of these are wildly variable you never know how many people are going to want to buy or sell Bitcoin at any given time you can kind of look at sentiments which is you know the feeling the general feeling of the the landscape of the the market and you can see whether or not people will think it’s a good time to buy or not you can see most people want to buy it’s a bullish market most people want to sell it’s a bearish market you can look at these things but those change routinely now when we’re looking at the Bitcoin block reward algorithm what you’re looking at is a schedule of when these miners are gonna start receiving less Bitcoin now the reason that’s important is they do have to cover their operational cost and one of the things that’s important to note is that over time the hash rate has gone up and that is the computational power of the network so they have to continually upgrade their hardware to be able to compete on the network to get these block rewards and I need to start showing you some charts we’ve been looking at a tweet for a long time okay we are currently about right here in the bitcoin having scheduled the left axis here the left y-axis is the current or is the total number of bitcoins it goes up to 21 million the blue line is the circulating supply so as of right now we have just over 18 million Bitcoin in circulation our block rewards are twelve and a half soon to decrease to six point two five and you’ll notice that that is I believe on the well whatever skill it’s on you can see the number down here per block and this is how many rewards are being given per block and that’s usually every 10 minutes on the network and we really have a good idea of when these things are going to occur it’s programmed in now it can vary the blocks can be mined sooner or even slower than 10 minutes so that’s why all of these dates are just kind of estimated out in the future we can see that schedule going out ahead and there’s the certainty of the Bitcoin block reward algorithm can tell us exactly how many Bitcoin have been created in each having period you can see during the first having period there were ten and a half million in a second there were five point two five million and in the third there’s going to be two point six two five million created and then starting in 2020 to 2024 roughly there’s going to be one one million three hundred twelve thousand five hundred Bitcoin mined and you notice it keeps getting cut in half that’s by design and that’s one thing we know people are having to put more resources in as miners and they are going to start receiving less so if they want to remain profitable the price that they use to justify buying the hardware at at a particular price needs to either stay flat or continue to go up or if it goes below their profitability level they either have to operate at a loss which is not ideal or they’re going to sell their equipment and then eventually the network difficulty will kind of level out and they will actually the network typically will level out excuse me I’m sorry I’m repeating myself here the network difficulty will level out and then they will have a higher share of the network hash at that point which means they will get more rewards if they stay in so it’s a very interesting concept that you want to try to operate at a profit but yet there’s less coins coming in so as a miner yourself you’re going to have to you’re only going to be able to sell 6.25 no matter what so if you get the block reward and there’s all this pressure from people buying coming in and you’re or the pressure pushing it down and suddenly you have less pressure to push with and you had twelve and a half per block and now you only have six point two five it kind of works in a way that’s actually good for you as a miner that you have less to sell because you’re putting less pressure on the market to bring the price down so it can in fact already be priced in perhaps that’s why in the past we’ve had these huge increases in price perhaps people thought okay the happening has happened there’s less Bitcoin in here I need to get some of it and that’s why the price goes up so much but then interest sort of dies down and price goes down you could say this is due to the having people pricing it in for the next having now this information is all publicly available it’s in the source code for Bitcoin so how could it not already be priced in and it’s quite simple it’s just because of the pressures we were talking about you can’t actually price in the activity that is yet to occur we have not had a change in sell pressure yet for 2020 due to the block reward changing but from all points backwards in history we are well aware that there is going to be a halving occur sometime in May of 2020 so yes as knowledgeable traders we can price in that information and we can say that we think the value will be much more so we can buy now and we have priced it in whereas the actual activity on the market has not priced in the FET of the having on the market due to the inflows and outflows that are occurring now one thing to look at is the mining profitability chart and this is over the last five years or so going back through 2015 and this is to capture the having event in 2016 you can see profitability has been going down over time with the Bitcoin network and you’ll notice that the having event it instantly went down and it was let’s see where was it here one point six and it goes down down to about point eight so it cut the profitability in half instantly so if you weren’t already off operating in profitability you probably certainly wouldn’t after the halving so you want the price to go up if you’re a minor so that you can continue to operate and make money profitably you can see there were spikes and the difficulty continues to increase as there is more hash power added to the network and now let’s take a look at that this is the entire history of Bitcoin you can see it’s the hash rate the computational power on the network is growing exponentially and the reason it’s growing is there’s better equipment and people are putting more of that equipment onto the network so people are paying for better hardware and they are paying for lots more of it and that causes this sort of exponential growth in the hash rate to the network and that’s also why you could see that the profitability went down there’s more and more people joining the network and if all these people want to operate at at least a break-even level the price needs to go up for them to justify running the equipment now it could mean if the hash rate were to drop if people were to leave the market and I’m sorry my head’s in the way but if people were to leave the market and the hash trade were to start going down again let me actually pull this one out so that you can see this a bit better I apologize I forget that my head’s in the way sometimes but I pull it over just a little bit more okay you can see as the hash rate goes up it also goes down quite a bit sometimes and this can be due to very many different reasons there were a lot of hard Forks last year where people who were running equipment on Bitcoin could have transferred on to other networks and that might have been what happened but it also could have been because they were no longer operating profitability but when this happens the network difficulty adjust and let’s take a look at that on the chart when these people left the network the difficulty decreased so those who remained on the network if it if the difficulty dropped proportionately to the hash rate dropping then their profitability stays at about the same level so that’s something to keep in mind the profitability is the key target for the miners and it does have a large impact on price and like I mentioned everything external to the miners is completely wildly variable and it plays a huge impact because without those people buying the Bitcoin the pressure up there would be the price would continue to drop and the network would most likely fall apart that’s just kind of my opinion although there are people who would keep it alive for a very long time and but if people weren’t interested in it the price would not go up period and people would not invest so much money in this equipment so that they could try to operate profitably so yes going back to the main question is the having priced in yes and no people are knowledgeable about the having coming up not everyone is aware of that although most people trading it probably should be there are always new people and people who have heard about Bitcoin who don’t know about it who in no way could have priced it in and then of course there is the effect that the actual change in the rewards the miners are getting has not been applied yet so that has not been priced in so individuals can price it in but the actual effect that it has on the network and the price in the market not entirely can be priced in and judging on history there’s been a few have a couple of happening so far around in here and around in here and if history is an indicator the price has jumped up dramatically after each one the following year or two so we’ll see if that continues to be the trend but for the network and the miners they sure would hope so so that they continue to be profitable and execute on the network but that’s all for now I just wanted to answer this question if you have any more questions if you think I missed something please leave a comment I’ll be sure to address it and give you any credit you might deserve so thanks and make sure you like the video I was gonna say have a nice day like the video if you liked it and please subscribe always forget to say that at the end of videos it helps me a lot so I feel bad when I forget to do it please do that if you can if not just have a nice day and check out the other videos that we have thank you [Music]
