The event would boost Bitcoin prices in the medium or long term. Miners’ behavior can influence future prices.
After the third halving of Bitcoin, part of the mining community hopes that this event will help increase the price of Bitcoin (BTC), in the coming hours, days or months.
Last April, the price of Bitcoin recovered more than 20% and even reached USD 9,400 despite the Covid-19 pandemic. However, on the night of May 10th, the price of Bitcoin was USD 8,757, whilst after the halving, the night of May 11th, the price of BTC was approximately USD 8,595.
Until now, experts do not take for granted that the halving will fuel a bullish rally in Bitcoin, but they do consider that this reduction could give a positive boost to the value of the main cryptocurrency, in the medium or long term. Recent data on the Bitcoin chain suggests that miners expect an increase in the price of the main cryptocurrency.
Bitcoin halving is an event of the cryptocurrency industry. The halving is part of Bitcoin’s monetary policy. Its goal is to self-regulate the issuance of bitcoins, which is limited to 21 million cryptocurrencies.
This event occurs every 210,000 mined blocks, approximately every four years. It consists of reducing the rewards in the mined blocks. During the halving, these rewards go from 12, 5 to 6.25 BTC every 10 minutes.
Possible Long-Term Bitcoin Price Rise
Some members of the mining community believe that the halving would generate positive reactions in the price of Bitcoin. According to PlanB, the creator of the “Stock to Flow” (S2F) model, the reduction of the Bitcoin issuance rate seeks to increase the price of Bitcoin in the long term.
Recently, the analyst said in a tweet: “In my opinion, the halving of Bitcoin 2020 will be like in 2012 and 2016. According to the S2F model, I expect 10 times the price (order of magnitude, not precise) 1-2 years after the halving. The halving will be make-or-break for S2F model. I hope this halving will teach us more about the underlying fundamentals & network effects”.
However, other members of the mining community believe that the halving is a factor that is already taken into account in current Bitcoin prices, since this is a public event and the community knew it would occur in the first days of May 2020.
Miners Set the Price
On the other hand, other members of the crypto community consider that the price of Bitcoin is the result of speculation and that supply and demand play an important role to set it. The truth is that miners are important when it comes to understanding the price of Bitcoin, as they are the only providers of new currencies on the market.
Miners create constant selling pressure when they liquidate their minted coins to pay for electricity services and lodging expenses. In this way, miners “dictate” the price of Bitcoin on the supply side.
Although crypto exchanges are another major player in the market, they do not represent real buying or selling pressure, but rather short-term buying and selling movements.
Joe Nemelka, a data analyst of the company CryptoQuant, recently explained that an increase in the number of miners in crypto-exchanges may indicate volatility. Miners liquidate their bitcoins for different reasons. But Nemelka believes that monitoring miners’ behavior will help detect subtle changes in trends.
When miners enter exchanges in a bull market, they could be creating more selling pressure at prices they believe would be wise to sell.
On the other hand, a high influx of miners when the price has been going down can generate a change in the market as some miners hold on to their BTC and the selling pressure decreases.
Either way, the change or not in Bitcoin prices can be evident days, even months or years, after the halving.
By María Rodríguez