The sharp drop in oil prices in recent days contrasted with Bitcoin’s 5% boom. There is much more interest in the upcoming Bitcoin halving than in those of 2012 and 2016.
Bitcoin has recovered from the big drop of last March 12th and has been particularly promising in recent days. For the first time since that sharp decline, the pioneering cryptocurrency managed to exceed USD 7,500, with an increase of more than 5%. This performance is excellent in the face of the all-time drop in oil futures contracts, which traded negatively between April 20tht and 21st.
Due to the effects of global measures to combat COVID-19, oil consumption has reached all-time lows in recent weeks, which has pushed oil storage provisions almost to their limits. This affected oil futures contracts, particularly those of May, whose price fell to negative figures last April 20th, in the case of West Texas Intermediate (WTI) oil futures contracts, from the USA.
Oil has also shown more volatility in April than Bitcoin. Both the recent all-time drop of oil and the fact that its volatility exceeds that of the main cryptocurrency, an asset considered highly volatile, are points in its favor. Bitcoin’s favorable positioning becomes more important in the vicinity of the halving scheduled for May.
Due to the growth in Bitcoin adoption, there seems to be greater expectation this time about the impact of the reduction of the reward to miners by half, than in the previous halvings of November 2012 and July 2016.
A price increase occurs when miners retain BTC, with a longer waiting period and smaller magnitude of that increase. In the first halving, the subsequent appreciation of BTC was almost two orders of magnitude in two successive rises. In the second halving, the rise occurred a year and a half later, with a lower overall appreciation.
Even with lower expectations for the medium-term performance of Bitcoin, the retention of BTC, before and after the halving, could result in a potential bullish momentum.
Deferred Effect
In another analysis, developer, and blogger Sylvain Saurel states that in the year following the previous halvings (which he calls the N+1 year), there was an increase of 5,800% in 2013 and one by 1,450% in 2017. On the other hand, Saurel draws attention to the fact that in the N+2 year, in the two previous cases of reduction of the reward, there was a strong correction of 58.5% in 2014 and one of 75% in 2018.
Saurel also examined the evolution of Bitcoin’s price during the first 20 days of the year, from 2013 to 2020, but did not find a correlation of these trends with the trend of the respective years. For example, in 2012 and 2016 (when the previous halving occurred), Bitcoin recorded growth by 23% and a fall by 3.5% during the first 20 days of the year, with an annual growth by 156% and 123% respectively.
Saurel highlights that, with a 22% growth in the first 20 days of 2020, the highest growth since 2012 occurred during that period.
There are still about 2,400 blocks to be mined before the next halving occurs, which will take daily BTC production from about 1,800 to 900. This reduction by half is scheduled to decrease Bitcoin’s inflation and maintain its shortage, as Saurel highlights. This represents an advantage for Bitcoin, compared to the printing of “inorganic money” by central banks.
By Willmen Blanco
