At the time it took place (19:23 UTC or 3:30 p.m. ET), bitcoin was trading below its 10-day and 50-day moving averages, bearish technical indicators after a huge 10% drop in price on May 10 at 00:00 UTC. This was triggered by an outage striking San Francisco-based exchange Coinbase. At press time, Bitcoin (BTC) was trading down less than a percent over 24 hours at $8,677. The question now is what will happen after Bitcoin Halving?
Bitcoin Halving in the Past
The bitcoin halving arrived amid economic unpredictability due to the coronavirus pandemic. This not-very-rare event reduced the new supply of bitcoin generated by cryptocurrency miners from 12.5 to 6.25 BTC per block. Shockingly, this was a reduction from roughly 1,800 BTC down to 900 BTC per day. “The international scenario is quite different than in 2016, and bitcoin has never been tested during a global economic crisis. So we can expect anything to happen,” said Sebastian Serrano, CEO of Argentina-based cryptocurrency exchange Ripio.
Traders are anticipating unpredictability in bitcoin’s price for the short term, hence more volatility. That is pretty much the essence of what Katie Stockton, managing partner of Fairfield Strategies said. “We don’t have a big sample size of past halvings, but they generally have a positive impact on sentiment after a short-term period of volatility.” He added, “I think the anticipation of the halving has contributed to the outperformance by bitcoin over the past few weeks, and that a breakout greater than $10,055 is likely to unfold after a few weeks of choppiness triggered by today’s gap,”.
What are Big Names Saying?
Mati Greenspan, founder of Quantum Economics, wrote in his daily note that the halving may not mean much immediately. However, he agrees this event will be a meaningful one over a long time horizon. “It is likely to have an impact in the price over the long term, as the reduced daily issuance makes the asset more scarce,” Greenspan wrote.
“Bitcoin mining pools have actually been accumulating ahead of the halving,” Philip Gradwell, chief economist at analytics firm Chainalysis, said Monday on a CoinDesk Consensus:Distributed panel. “Because of the halving, we could have a bit of a liquidity crunch.”
Despite higher volumes on Coinbase prior to bitcoin’s halving, it doesn’t mean the volume will continue to rise in the short term. This is by Christopher Thomas, head of digital assets at Swissquote Bank. “I think we’re now in the zone where no significant retail money will come in this week. I also think we’ll trade between $8,000-$9,000 for the next week or so, with a reasonable possibility of a drop to $7,300.”
At press time, mining hashpower has yet to see a significant drop. Vishal Shah, an options trader and founder of derivatives exchange Alpha5, is taking a wait-and-see approach. “Until we see a stabilization in mining activity, for which I’d like to see the proof in the pudding, I’m in no hurry to be buying bitcoin.”
On the one hand, how miners prepared for the event was/is important. On the other, Shah is keeping an eye on what the miners will do next. Their activities include keeping track of how much mining power will now shut off and how much selling will happen over the next month. Thus, miner incentives are important. “My view has been that reduced rewards are likely to impact miner incentives more than the pedestrian speculator,” he added.