Fair market value of bitcoin: halving effect

  • Received October 17, 2019;
    Accepted November 15, 2019;
    Published November 28, 2019
  • Author(s)
  • DOI
    http://dx.doi.org/10.21511/imfi.16(4).2019.07
  • Article Info
    Volume 16 2019, Issue #4, pp. 72-85
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The purpose of this article is to analyze the effect that halving has on the fair market value of bitcoins. The main hypothesis of the study is that the decline in the cost of miners’ remuneration for mining is a significant factor that affects the price of cryptocurrencies. The article examines the factors that regulate the issuing process. The significance of a limited supply of bitcoin is detailed in the article, as well as the mechanism for the implementation of the issue of new bitcoins. The study compares the historical inflation data of the US dollar and the projected data on the inflation of bitcoin. The article analyzes the main technical element of cryptocurrency – halving – when the miner’s reward is halved. This analysis includes the mathematical methods of statistical data processing. Research results show that reducing remuneration by half every four years leads to an increased market value of the cryptocurrency. This relationship is clearly illustrated by the Kendall rank correlation method. The results of the study can have a significant impact on the fundamental assessment of bitcoin and can also enable investors to assess any of the existing and operating cryptocurrencies according to this method.

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    • Figure 1. Bitcoin emission for the years 2009–2140
    • Figure 2. US dollar inflation 1914–2014, %
    • Figure 3. Bitcoin inflation 2009–2109, %
    • Figure 4. Logarithmic graph of the value of the bitcoin 2011–2019, US dollars
    • Figure 5. The effect of emission reduction of bitcoins on the price, July 2011 – March 2015
    • Figure 6. The effect of emission reduction of bitcoins on the price, April 2015 – November 2018
    • Table 1. Bitcoin emission
    • Table 2. Bitcoin inflation
    • Table 3. Average price change and bitcoin block remuneration