Why Bitcoin Halving is not Good for Bitcoin

The reward for mining Bitcoin has just been cut in half. All things being equal, miners will get half the number of Bitcoins for every unit of energy spent from now on. However, this is no reason to expect prices for Bitcoin to go up. The fact that something is more expensive to produce does not add value to it. The fact that energy bills go up for miners, does not oblige anyone to value their products any higher.

While it is true that this will reduce the inflation rate of Bitcoin, it does not mean that demand will be any greater than it already is. However, with bigger bills to pay per unit mined, more Bitcoins will have to be sold to keep mining operations afloat. They will have to sell exactly twice as many as they've been selling thus far at current prices. Without a corresponding increase in demand, prices are likely to go down rather than up.

The only way to keep Bitcoin afloat at current prices is to sucker in new buyers in sufficient numbers to offset the increased selling by miners. With Bitcoin still trading at about 50% of where it traded late 2017, this seems unlikely to happen.

By Marco Krohn - Own work, CC BY-SA 4.0, Link