Bitcoin outperforms major companies before halving!

Bitcoin was created in 2008 pseudonymously by Satoshi Nakamoto and became the first decentralized crypto-currency to come into life. Since then, it has gained a great popularity among a considerable group of investors aspiring to deal freely without the restrictions imposed by central banks and financial institutions around the globe. Despite the issuance of more than five thousand crypto-currency, Bitcoin still attracts the largest number of investors and accounts for more than 67% of the market value of crypto-currencies. In February 2011, Bitcoin’s value equaled one dollar and in December 2017, it recorded its peak reaching around twenty thousand dollars, today its value is around nine thousand dollars. However, as the halving date approaches, what awaits investors in the coming period? 

Bitcoin: outperforming major companies

Looking at Bitcoin’s performance in 2020, amid the Covid-19 crisis in which stock markets crashed and indexes recorded historical losses, we realize that Bitcoin’s price outperformed the stocks’ performance of major companies. In fact, during the first quarter of 2020, Bitcoin recorded only 11% losses while Google and Apple recorded 15% and Facebook recorded 20% losses. However, Amazon was able to record a 3% gain surpassing Bitcoin. Now looking at the performance of these companies in the first 4 months of 2020, after the stock market started to wipe out its losses, we realize that Bitcoin once again was able to outperform major companies recording a 20% gain while Google, Apple, and Facebook all recorded 2% losses.

Stocks Performance

Bitcoin: the gold of crypto-currencies

Since its inception, Bircoin’s fixed supply was set at 21 million Bitcoin. Due to its nature, crypto-currencies are created through a mining process. In details, miners are expected to solve complicated algorithms and validate the transactions in order to add new blocks to the chain (blockchain technology). Every time a miner successfully adds a block to the chain, he receives a reward in the form of bitcoins and that is how Bitcoins are mined. Since the supply of Bitcoins is predetermined, the reward will drop following a specific pattern. Actually, the reward is halved approximately once every four years.

Like gold, Bitcoins are created through a mining process, and like gold as well, Bitcoins’ supply is limited.  The latter also follows a deflationary supply model, which is supposed to induce a raise in the value of the currency. 

12 May 2020: date of the third halving

When Bitcoin was founded, miners’ reward was 50 Bitcoin per block. The difficulty of algorithms is adjusted automatically according to how quickly they were being resolved to make sure that only one block is added to the chain every 10 minutes.

The reward is divided into half every time 210 thousand blocks were added, which happens almost every four years. Following this strategy, the supply of Bitcoins will reach its limit in 2140 and the reward by then will be equal to zero Bitcoin. 

The reward was halved the first time in 2012 from 50 to 25 Bitcoin and then in 2016 from 25 to 12.5 Bitcoin. On the 12^th of May, the reward is going to decrease to 6.25 Bitcoin, which is expected to be accompanied by a rise in the value of the crypto-currency as it was the case during the previous two scenarios. This appreciation in value is best justified by the decrease in additional supply.

1st Reward Halving

Source: Karken Intelligence