The biggest regular event for the bitcoin network is happening just 14 days from now. As the network and the ecosystem around it prepares for the big moment of this years’ halving, the price is reacting as well. The top cryptocurrency by market cap rose to about 7,800 USD early yesterday and this is when it hit its highest value in almost two months.
The previous high was seen on March 12, which is now known as Black Thursday when the global COVID-19 coronavirus pandemic took the price from about 7,950 USD to 4,700 USD in a single day of trading. Now, the 7,700 USD level of trading from Monday means that the cryptocurrency is up by around 100 percent since the lows from mid-March.
All of this happening just days before the halving is good news for the community, but also external traders and investors who are looking to capitalize on the moment when the mining difficulty increases. The question is how far will the rally take the price and will it do in a stable manner. At this moment, the signs are, like often in the crypto community, very mixed, even though they lean into the optimistic territory.
Global Market Rally
Before the crypto community begins opening bottles of champagne to celebrate, some analysts are pointing out that the rally in the digital currency domain is not a stand-alone event. Instead, it could be just a part of the global rally among the stock markets. This was good news for investors all over the world, but it is likely not the only factor. On April 21, the low was at 6,800 USD and it climbed by 1000 USD thanks to factors that are beyond just the prices of equities.
Furthermore, there is some evidence that even whatever sync there might have been between the markets and the bitcoin price is now gone. During the previous week, the S&P 5000 saw a 1.3 percent loss. At the same time, bitcoin price rose 6 percent. Even the commotion regarding the insanely plummeting oil prices did not keep bitcoin down for long. Instead, it rose from the slump quickly to get to the present level of results.
Of course, the logical answer to all of these dilemmas is the incoming process of network halving. Many see it as the main reason for the decoupling that is occurring with the equity markets. Even though these managed to pull down bitcoin in a surprisingly effective manner at the start of the financial crisis, it does not seem that the halving, which is rapidly approaching, is changing the narrative. The halving is scheduled to take place on May 12.
Once it is completed successfully, the reward crypto miners will get from a mined block will drop to 6.25 BTC. Presently it stands at 12.5 BTC. In the crypto community, there is a prevalent narrative that the halving process created a deficit in supply, which in turn props up the price of bitcoin.
According to some cryptocurrency historians, the halvings that took place in 2016 and 2012 had been direct precursors to the bull markets. These took place in 2017 and 2013. While they are not directly tied, as it is clear from the discrepancy in the years, analysts still believe that these regular occurrences support the formation offer potential a long-lasting price rally.
There is another important element in the entire process, which is rarely seen in the cryptocurrency domain. That is the simple factor of having an occurrence inside of the network that is completely and utterly regular in nature. Having something like this does not often occur in any cryptocurrency network but especially inside of the Bitcoin blockchain. Here it’s much more often to see completely irregular occurrences like the much-debated reasons for huge price changes.
In an environment where nothing is regular or predictable, having one such event is often the lynchpin around everything potentially can revolve. Also, there is the ability to learn from the previous halvings, which in itself is also precious in a domain that is so novel and young like the cryptocurrencies. This means that the predictable nature of halvings is something all traders and investors are counting on, in one way or another.
Lastly, like always in any massive movement of the bitcoin network, it is the institutional actors who carry the most influence. In recent weeks, exchanges saw a return of so-called macro traders and institutional investors. Many pulled out of the market because of the crash and felt hesitant to return in the first days after it happened. This is usually followed by the fear of the bottom not being known and the investors dreading that the crash might continue.
Now, all indicators point that it is over and many accounts are also seeing massive withdrawals of BTC funds, signaling a desire to keep the funds for a long period. While these are not exactly HODL users, they are the ones that will keep hold of their BTC for a period of weeks or even some months. Then, once the rally is clearly in the higher reaches of the price range, the same investors will sell a part or the entirety of their holdings. Bitcoin futures are also seeing plenty of action in the previous days, which is a further sign of activity.
Like on the last two occasions, the expectations around the halving are big and growing. Chances are that they will push the price up at least somewhat, while a major bull run is a bit less likely, having in mind the entire state of the global economy. Similar to esports, unicorn startups, and many other digital-only ventures, perception and expectations play a big part here.
But, there is still an important aspect of the story that should provide the most comfort in the long-term viability of bitcoin – no one is expecting, like before the previous halving, that something might go wrong technically. This in itself shows just how far the BTC network came in the previous years.