Have you heard of “The Halving?” Many—if not most—retail traders and investors may not have heard of it. Those that have probably don’t care all that much about it. For that reason, all those HODLers who take up a lot of space on Reddit and Twitter give themselves a pat on the back.
After all, they know something the newbs don’t—that in May 2020, the amount of reward Bitcoin miners will receive for a successful block will drop in half to 6.25 BTC from the current 12.5 BTC. Given that there are new blocks roughly every 10 minutes, that means total new supply of bitcoins each day will fall to 900 BTC from 1,800 BTC.
Except none of this actually matters.
That’s because halvings are one of the most known events in crypto. They occur whenever 210,000 blocks are mined, something the world has known since Bitcoin launched a decade ago. It will all end when the last bitcoin is mined, sometime in the year 2140. At that point, there will be 21 million bitcoins and no more. As of now, more than 80% of all possible bitcoins have been mined already.
None of this is news. None of this is a state secret.
It’s one of the big selling points Bitcoin fans make about the first real cryptocurrency. Its supply is finite, unlike fiat money. No central bank pumps more bitcoins to boost economies, they say, meaning that if the world were suddenly to adopt bitcoin as the universal currency, there would be no inflation. If anything, you’d get deflation because growing output would be denominated with a finite amount of currency (a wrong assumption since you can still have fractional reserve banking with a finite money supply, but let’s not let facts get in the way of The Truth).
In short, Bitcoin advocates have talked incessantly for 10 years about how the cryptocurrency is perfect in part because its supply schedule is known. Yet they insist that the masses have no idea that the supply schedule is known.
One of the biggest advocates of what we can call the Halving Theory of A Bitcoin Bull Market is Anthony Pompliano, or “Pomp” as he calls himself. The cryptocurrency personality and cofounder of Morgan Creek Digital Assets has built a lucrative business for himself hyping Bitcoin ad nauseum on social media, his newsletter, and podcast. Indeed, he has amassed more than a quarter of a million Twitter followers (he ranked No. 2 on The Modern Consensus 2018 Crypto Twitter Power List, just behind CoinDesk).
That sort of notoriety has means that when business news channels want a talking head to offer insight in Bitcoin—particularly when there’s a rally—Pompliano is at the ready. It’s especially helpful for TV bookers that he’s quite bullish. Just this past week, he was on CNBC’s Squawk Box talking regulation with CoinShares’ Meltem Demirors. On Friday, he was on CNN spouting his prediction that halvings will help cause Bitcoin to rocket to $100,000 by the end of 2021.
And he’s been doing this for a couple of years now. Back in February 2017, Pompliano was on Bloomberg giving kudos to regulators for not coming down too hard on Bitcoin even as prices crumbled and Japan was trying to sort out the Mt. Gox mess.
So it was at first quite bizarre when Pompliano went after one of Bloomberg Television’s most cryptocurrency-knowledgeable hosts, Joe Weisenthal, this past weekend.
Weisenthal isn’t just a newsreader. The former managing editor of Business Insider began Bitcoin and cryptocurrency technology as early as 2013. That doesn’t mean he’s a fan, though. In November of that year, he called Bitcoin “a joke,” arguing it was “probably in a bubble.” At the time, it was trading at $260, though Weisenthal also said in that same piece, “I want to be clear that saying something is a bubble is not saying it will go down. It could go to $500 or $1000 or $10,000. That’s the nature of manias.”
A couple of months after that, he poked fun at the ease of creating a new cryptocurrency by building one of his own, Stalwartbucks. After all, Dogecoin launched a few weeks before and already had a marketcap of $60 million (it’s now over $370 million, according to CoinMarketCap, while Stalwartbucks is nowhere to be found).
Getting back to halving, Bitcoin isn’t the only one that has it as a feature. Many others, which often have huge chunks of Bitcoin’s DNA in their code, also undergo halvings. On Saturday, it was Litecoin turn. The coin rallied more than 350% from January to June and some speculated it was because of the anticipated halving.
Unfortunately for those who bought in late June expecting a pop in August, they instead saw Litecoin lose a third of its value. “Now that the halving is here, some investors are starting to exit the trade. Halvings tend to be priced in, so the event itself isn’t the positive catalyst that many expect,” said Eric Turner, Mesari’s director of research, to Bloomberg on Friday.
That afternoon, Weisenthal tweeted out the story adding that crypto bulls can’t be proponents of efficient markets while at the same time believing halvings aren’t already priced in.
He continued to drive home the point:
A few hours later, Pompliano took to Twitter to call Weisenthal’s argument a “dumb take”:
He followed it up with a strange conspiracy theory and a slight, calling him “basically a poor man’s [Nouriel] Roubini” (Pomp and Roubini have feuded many times in the past on social media):
After Weisenthal noted Pomp’s over-the-top tweet, the Snap-employee-for-just-three-weeks-but-still-on-his-LinkedIn-profile shot back:
He later said Weisenthal sounded ridiculous:
Pomp went on and on insulting Weisenthal, though the Bloomberg host appears to have been respectful of the former U.S. Army sergeant:
Then again, Weisenthal did take a shot at Pomp’s 2018 praise of Venezuela:
It would seem this was a dispute about the Efficient Market Hypothesis that turned personal—except there may have been another motivation behind Pompliano’s bombast.
It turns out that Pomp sent a private message to Weisenthal on Twitter asking if he’d like to debate on another platform that “get a lot of traffic”; What Pompliano didn’t realize is that Weisenthal had no qualms about reposting the message to public:
That infuriated Pomp:
It’s 2019. Everything is about social media traffic, as Pomp, a former product manager at Facebook, knows all too well.
And that leads to another big concept in finance besides the Efficient Market Hypothesis. The Greater Fool Theory, as it’s defined by Black’s Law Dictionary, “puts forth the view that any price, as unrealistic as it might be, is warranted if one buyer believes that another buyer will pay an even higher price for the same item. This line of thinking drives stock market and commodity market booms and manias. Busts and paranoias jump in when the bubble pops.”
The underlying assumption in the view for why halvings would matter is that there are people out there who foolishly don’t know it’s going to happen. Sure, it’s everywhere (for an example, see above where Pompliano went on CNN to tell millions of people about it) but the thinking is there are people out there—somewhere—who have yet to hear about it. Boy, they’ll be so surprised when in a year fewer new bitcoins trickle into the world. The rubes will want to buy more, the HODLers believe, and the smarter folks who bought in 2019 will be able to sell it to them for a premium.
The Pomplianos of the world—he’s not the only one; they are legion—have been peddling this line of thinking for sometime, claiming vast riches await those who are genius enough to buy early and HODL in order to stuff it on to the naïve masses down the road.
The funny thing about the Greater Fool Theory, though, is that the greater fools ends up being the ones who think they can outwit everyone else.