If you’ve been following me recently then you know I believe 2020 is going to be a stunning year for the stock market. The market continues to show tremendous strength 10 years into the current bull market, and it isn’t showing any signs of slowing down.
There are many different trading vehicles to make money in the current market environment. Personally, I like to focus on growth stocks, but I know other investors are interested in different investing strategies.
I’ve gotten a lot of questions on cryptocurrencies and bitcoin recently, and while I don’t follow them at all, I know someone who does. My InvestorPlace colleague Matt McCall has been tracking these for some time. He recently raised his hand about a new opportunity that I want to pass along to you today.
As I said, I believe the best opportunities are in stocks as we enter 2020, but Matt shared a fascinating analysis of the cryptocurrency market that you might find interesting, so I want to share that with you today.
I know you’ll find the information below informative and entertaining.
It’s time to start planning. We’re gearing up for an event that’s going to affect the cryptocurrency market in a big way. And it presents us with an opportunity too incredible to ignore.
Whatever your take on bitcoin (BTC), the last two times this event took place, the world’s largest crypto by market cap — worth more than $132 billion as of this writing – soared into the stratosphere.
I’m talking about what’s called “the halvening.” If you’re a crypto enthusiast, you probably know what I’m talking about. If not, let me briefly explain…
The halvening is an event that happens once every few years with bitcoin. It’s written into its code. Basically, it works like this.
Bitcoins are created by “bitcoin miners” who try to solve complex computer puzzles and are rewarded for doing so with an amount of bitcoin that’s already baked into the system. The side-benefit for users is that the bitcoin miners create new bitcoin and verify blocks of transactions that come to represent the unbroken chain of transactions on the network. Miners also help secure the bitcoin network.
Right now, a miner receives 12.5 bitcoins for mining one block.
But soon, this figure will be cut in half – miners will receive only 6.25 bitcoins as a reward for mining one block.
The purpose of this “halving” of rewards is to limit the supply of bitcoin over time. In the end, only 21 million bitcoins will ever be created. That’s why bitcoin is a type of “deflationary” currency in that no one — not the U.S. government or China or a corporate board — will be able to change this aspect of it. Again, it’s baked into the system and a major part of the appeal of bitcoin as an investment, similar in some ways to gold with its limited supply.
This means that thanks to the halvening, the market will receive half the daily supply of new bitcoins that we have right now.
Now, going from 12 to 6 bitcoins as a reward for miners might not sound like a big deal…
But just consider what happened to the price of bitcoin after the first halvening in November 2012, when the reward went from 50 bitcoins to 25… (Note: the vertical axis on each graph is in U.S. dollars.)
Then look at what happened after the second halvening took place in 2016, when the reward went from 25 bitcoins to 12.5…
And this next event will remove the number of new bitcoins in circulation by even more: $63 million every single week.
When you consider how more than 80% of all the bitcoins that will ever be created have already been mined… and less than 20% of all bitcoins will ever be created in the future… this $63 million figure is astounding.
That’s why I’m predicting the biggest supply shock in cryptocurrency history. It’s basic supply and demand. If the demand for something remains constant and the supply is cut in half immediately… the price will soar!
German bank BayernLB predicts the 2020 halvening will send bitcoin prices to $90,000 from around $7,400 now. That’s a 1,116% increase – and it could even be low!
Don’t Neglect Altcoins
Bitcoin isn’t the only crypto that’s benefited from these halvening events.
There’s an entire separate class of cryptocurrencies outside of bitcoin called altcoins, or alternative coins. Think of bitcoin like Apple (AAPL) as it hit a $1 trillion market cap… while altcoins are the unicorn companies of today growing faster than Apple could have ever dreamed – companies like Uber Technologies (UBER), Airbnb, and SpaceX.
For example, over the same timeframe it took bitcoin to rise 2,000% after the first halvening, a cryptocurrency called litecoin (LTC) rose 7,483%. Another altcoin called dash shot up 2,658% during the first half of 2014 while bitcoin rose 53% over the same period.
The bottom line is that while the halvening pushed bitcoin to new heights, it made small altcoins grow exponentially higher.
The sort of returns I’m anticipating for the coming event could make all of this look like child’s play.
If you want to learn more about how the halvening works and what I see ahead for this rising asset class, I urge you to listen my 2020 Crypto Millionaire Summit. This could be the most important investment decision you’ll make this year.