Compared to the previous two Bitcoin (BTC) halvings that were marked by major jumps in the coin’s price around the time of the event, this halving may be different and BTC may not see a bull in the months following the event, according to CryptoCompare, a provider of the crypto market data.
The third Bitcoin mining reward halving is estimated to happen on May 12. Even the Google searches for ‘Bitcoin halving’ are skyrocketing, with recent searches “substantially eclips[ing] the search volumes for the last halving in July 2016, pointing to increased investor interest in the event,” CryptoCompare said in their recent report.
And all this is happening in the time of the COVID-19 pandemic, economic crisis, and the world’s central banks “conducting one of the greatest money supply experiments in history.”
The question is, however, if any of these elements will contribute to a rise in price. Though a decreasing supply and the stock-to-flow model may predict a price rise, and though the previous halvings of the miners’ reward were preceded and followed by price surges, CryptoCompare believes that this time “we may see less of a price increase in the year following the halving,” and there are several reasons why that may be the case.
1. The market is different
The 2020 market is very different from that in 2016, argue the analysts. The total daily BTC trading volume on spot exchanges are ten times what they were four years ago, reaching USD 21.6 billion on March 1 (and almost USD 55 billion in the past 24 hours). Also, 2020 has seen more diverse and larger market participants, as well as more established and developed exchanges and derivatives market.
2. Miners are not so powerful
Miners don’t have the same impact as in 2016. Back then, miners selling their BTC affected its sell pressure more. However, as said, there are more market participants, as well as higher spot and derivatives volumes, so “the drop in sell pressure from miners selling half the number of bitcoins will have less of an impact on the total sell pressure.”
3. Bearish bets
The BTC options market may give a glimpse into what’s to come, argues CryptoCompare, and it doesn’t predict a price rise. Actually, sellers of options believe that there is more downside risk to the BTC price, while buyers of options believe there are more downside movements to come. This also “holds for contracts expiring in June, September and even December.”
4. External shocks
The coronavirus-prompted crisis, as well as BTC now apparently tracking equities closely, can’t be ignored. CryptoCompare finds that “such dramatic external shocks to the bitcoin price so close to the halving may negate much of the supposed impact of these events.”
Meanwhile, BTC jumped over USD 9,000 level today before correcting lower again. At pixel time (12:30 PM UTC), BTC trades at USD 8,843 and is up by 9% in a day and by 24% in a week. The price increased 39% in a month and 64% in a year.
5. CME Gap under $4000
This chart is shared on my Twitter page, and depicts a CME gap that formed back in February 2019 at $3500~ price range.
Historically, all CME gaps have been filled. If this stands true, we could see another big drop, and enter accumulation phase before future bull runs.