Bitcoin Halving Incoming: Hype and Fear Abound

With Bitcoin halving just a few days away, hype and fear abound. While no one knows for sure which direction prices will go before and after the much-anticipated halving event, opinions supporting both higher and lower value for the coin are plentiful. 

Bitcoin’s halving event is set to take place on May 12th, 2020. At that time, the rewards (freshly minted BTC) for mining a block on the bitcoin network will be cut in half. There are a few obvious things that will be affected by this halving event and a few that are a bit more obscure. 

Some of the key points to consider in connection with the incoming halving event are as follows:

  • Cost of operations will rise while supply will be cut in half. 
  • With supply rates diminished, demand is expected to increase. 
  • A higher price tag for bitcoin may correct the negative effects of the halving event for miners.

The question  as to whether prices will increase depends on many factors – many of which are related to actual market data and analytics and many others based on hype and fear. Both analytical data and human emotion drive bitcoin prices, so it is important to consider them both. 

Based on past market performance following bitcoin halving events, it would be fair to assume that prices will rise in the coming days and weeks. There have been two halving events previous to the one incoming, and both have created large price jumps for bitcoin. If one were to assume that this year’s halving event was going to follow a similar trajectory to past events, as shown on historical charts, the decision to hold onto whatever BTC you currently have would make a lot of sense. Especially, seeing as how previous halving events created a multitude of crypto-millionaires

As supply becomes more limited, demand is expected to rise to create an expected equilibrium. That is an obvious factor that many are pointing to when predicting higher prices for bitcoin following the halving event. 

Less obvious for many is the reality that many miners face in times of halving. Fewer rewards for their efforts mean higher operational costs. Higher bills lead miners to hold onto their freshly mined coins in an effort to make more of a return when prices increase. Operational costs going up may also mean that miners will try to control the outflow of new coins, essentially controlling supply as we move forward. Throttling outflow of new coins would help miners drive prices up at a somewhat predictable rate, providing an opportunity to get the highest prices possible for their efforts. 

When considering both investors and miners, hype and fear seem to be driving prices up at the moment and will continue to do so in the near future. However, will that be enough for sustained price gains for the world’s most popular cryptocurrency? Some indicators suggest otherwise. 

For many, technical analysis proves itself to be a more valuable tool to predict market movement than any other. Looking at some market indicators, some analysts are pointing to factors that suggest a less-impressive jump in price for bitcoin may be in the cards. 

One such indicator is the RSI which is currently showing BTC as being severely overbought. With a reading of over 75, it would be fair to assume a correction is incoming. Further supporting an analytical voice of reason is a closer inspection of past halving data which points to a correction immediately following the event. Over time, the appreciation in price is there, of course, but many ignore the dip before the price jump when talking about BTC going to the moon. We will have to wait and see what is in store this time. 

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