The likelihood of Bitcoin falling after the halving. When assessing the impact of the halving on Bitcoin, most analysts rely on the emergence of scarcity, which leads to an unconditional price increase. However, Coinfactiva analysts list several arguments as to why the initial reaction may be negative.
Statistics
In one out of three cases, following the 2016 halving, Bitcoin corrected by more than 30%. There were no significant factors for a major sell-off, and the correction became a realization of the saying “buy the rumors, sell the news.” From the beginning of 2016, the price increased by 75%, and after the halving, it dropped by 37% from the local peak within two months to $470. This year, the price has increased by 74%, similarly motivating some players to cash out profits. The last time the “buy the rumors, sell the news” principle was realized was with the approval of spot ETFs: the price corrected by 21% to $38.5 thousand.
Halving Compensation
The difference between this fourth halving and previous ones lies in both the premature achievement of the historical maximum and the emergence of the “Bitcoin vacuum cleaner” in the form of ETFs. The halving represents a final reduction in incoming supply, but ETF investors are subject to emotions just like other market participants.
Currently, they have accumulated Bitcoin worth $11.3 billion, anticipating the upcoming scarcity and ensuring growth to a new maximum. But what will happen to the price if the funds start actively offloading their reserves? In this case, they will offset almost all the positives from the halving in the short and medium term.
The price is already under pressure as whales, miners, and long-term holders take profits, and spot ETFs show net outflows for the fourth consecutive day. These are excellent conditions for further correction.
Miner Impact
This time, the competition among miners is at an unprecedentedly intense level, with nearly a third of the network’s hash rate provided by public mining companies. To gauge the severity of the situation, one only needs to look at the profitability per terahash, which is increasingly lagging behind the price. If the correction prolongs, most miners, due to the drop in halving-related revenues, will increase the selling of reserves, the volume of which CryptoQuant estimates at 1.8 million BTC or $119 billion. Even a tenth of this sent to the market will have a significant negative impact.
Conclusion
The halving undoubtedly has a long-term positive effect by reducing the influx of fresh supply. However, in the months following it, the market reaction may be negative, and if all the listed risks materialize, the price could retract to $45 thousand.
Disclaimer
Be forewarned that the content within our website is presented in utmost sincerity and intended for informational purposes only. Any course of action undertaken based on this information is solely at the reader’s discretion, assuming full responsibility for their decisions. This content also does not seek to persuade or advise anyone to invest, as it does not offer financial or trading guidance. We urge you to exercise caution and conduct thorough research, seeking guidance from a skilled financial advisor, before engaging in cryptocurrency or securities investments.
