Next Bitcoin Halving May Not Lead to Bull Market, Says Bitmain CEO
Jihan Wu, co-founder and CEO of Chinese mining giant Bitmain, believes the next Bitcoin (BTC) block reward halving may not lead to a bull market, but the coin’s price will grow in the long term. Next Bitcoin Halving May Not Lead to Bull Market, Says Bitmain CEO
According to Chinese industry news outlet 8BTC’s report published on Oct. 11, Wu made his remarks during the World Digital Mining Summit held in Frankfurt.
Bulls May Be Late This Time
Per the report, Wu explained that the crypto market moves in cycles and this time the next bullish phase may not start after the halving. He is also confident that in a long-term perspective crypto enthusiasts should invest in mining hardware, adding:
“There are many uncertainties, but now is a good time to invest in crypto mining. If I were a miner, I would not stop mining but continuing to invest in mining equipment. We are currently in a short-term correction of price. Having a long-term perspective is significant. If bitcoin’s price remains unchanged after halving, the efficiency of existing equipment must be improved to balance efficiency and computing power.”
Wu also promised that the company’s five nanometer mining application-specific integrated circuits will enter mass production in early 2020 while three nanometer chips are already in production. Furthermore, he stated that the firm has set up repair centers which are expected to reduce repair time to three days by the end of 2019.
Wu also confirmed that Bitmain will launch the World Digital Mining Map, a service which will connect mining hardware owners with mining farm owners, and the Ant Training Academy — its mining training service.
As Cointelegraph reported on Oct. 9, Bitmain announced two new series 17 Bitcoin mining machines.
Next Bitcoin Halving Could Squeeze Out Retail Miners, But Jury’s Split On Price
Is The Next Halving Going To Send Bitcoin To The Moon?
Well, maybe not that fast. As the programmed reduction of the miners’ reward is approaching (expected to happen in May next year), people are disagreeing about its probable effects.
Bitcoin has gone through the halving two times before, in November 2012 and July 2016, and both times the events marked the beginning of the next bull market. But, it’s an open question if the halving brings an uptrend and if so, how strong that uptrend will be.
Miners took the stage to debate the issue last week at the recent World Digital Mining Summit in Frankfurt organized by Bitmain, the Chinese equipment manufacturer and pool owner.
Jihan Wu, co-founder and ex-CEO of Bitmain, is “pessimistic” about the prospect of a price surge after the halving. He suggested that the first two uptrends might have been “catching up with the bubble-and-bust cycle” phases at the time.
Further, he pointed to halving of litecoin in August, which sent the price not surging but plunging. The token’s value shot from $31 to $135 in the first half of the year, but then started falling in July, right before the halving. It’s now trading around $57.
“Maybe people speculate too much before the halving, and then you can’t sell the good news anymore. Maybe, this time a bullish cycle is not coming yet.”
Offstage, Wu told CoinDesk that the bump projected from the halving might be baked in because people have “started to bet on the price growth in advance”:
“During the first and second halving, people didn’t know what to expect, and during the second halving, the scaling debate complicated the situation. Now people are expecting it.”
But Matthew Roszak, chairman of the blockchain software company Bloq, saw things differently. He said that the maturity of the financial ecosystem around bitcoin spoke to it maintaining a higher price over time:
“There is a better footing for the Fidelitys, Bakkts and other household names entering the space,” Roszak said, adding that the buzz around Facebook’s Libra is also attracting new interest and new participants into the industry:
“All the demand from institutional investors is still crescendoing forward. Custody platforms, insurance, compliance, regulatory is all getting written and this is positive for bitcoin.”
Roszak expects the price to reach “somewhere between $15,000 and $100,000” and for the halving to kick off “a decade-plus of rising.”
The Purge And The Consolidation
Whoever is right about the halving’s impact, the event is important for miners worldwide. With the reward being reduced, profitability will also be cut, at least in the short term, so old versions of specialized mining machines, known as ASICs, will stop bringing their owners any profit.
The Antminer S9, the most popular ASIC model manufactured by Bitmain, has exhausted its productivity limit and “a lot of miners are running on a margin of profit,” Marco Streng, CEO of Genesis Mining, said on stage. The S9 and Canaan Creative’s Avalon A851 series, with a similar level of hashing power, are some of the most widely used mining equipment right now. Based on the mining pool f2pool’s index, these older models have a profit margin of 50 percent at bitcoin’s current price.
Replacing them with the new machines will help, the panel agreed, but Wu cautioned against miners buying as many machines as possible:
“If I were a mining rig investor, I would be more conservative, but I would keep investing.”
Bitmain released the new Antminer S17 in September and, starting on Friday, will also be selling the more dynamic S17+ version.
Keeping It Profitable
Streng, of Genesis Mining, says less hardware in circulation will serve the industry well in the long run. “We are going towards a really heavy industry with much longer life-cycles of the machines.”
“It’s a very brutal event. Most inefficient miners will be wiped out. But it’s driving the innovation,” Streng told CoinDesk, adding:
“It’s a psychological event, and there is a tendency for the price to increase. From my experience, a lot of miners are expecting the price to go up, so they reduce selling and weaken the selling pressure of the market.”
According to Streng, the main effect of the halving will be wiping out of individual small miners, which now account for less than 20 percent of the market.
Alexander Gavrik, a co-founder of the mining software company Uminers, said the market is getting less volatile as the main players are becoming larger and larger:
“The market is moving towards the industrial mining, and there won’t be hype like it used to be anymore. There are significantly less crypto enthusiasts on the market now.”
Bitcoin Price Diary: Losing Small Is Key To Long Term Success
In my fourth trade journal, I am updating my previous Bitcoin (BTC) position as well as discussing the reasons that I have reentered a new long position on the same asset. I am also highlighting a quick loss on Ravencoin (RVN), which dropped alongside Bitcoin. As I often say, this loss is proof that you win some and you lose some. What matters is that you lose small.
As mentioned previously, I took a swing position in Bitcoin on Sept. 26 at $7,914. I exited 50% of the trade at $8,625. After moving my stops well into profit and below support, I stopped out in profit with the remainder of the trade, at $8,390. This amounted to an 8.9% profit on the first half of the position and a 6% profit on the back half. As a whole, I bagged a 7.45% profit on the trade.
I reentered a new Bitcoin position on October 16th, at $7,940.
Setting Up The Trade
Targets: $8,395, $8,949, $9,723
Stop Loss: I set the stop loss at $7,834 which is below the ascending channel support with a bit of breathing room to avoid a long wick or shake out.
Calculating The Risk-Reward Ratio
It’s also good practice to consider the risk to reward ratio when making an investment, especially with altcoins given Bitcoin’s current dominance rate.
The risk to reward ratio measures the difference between a trade’s entry point all the way to the stop-loss and sell or take-profit order.
Risk/Reward: Target 1 = 4.38, Target 2 = 9.7 Target 3 = 17.16
The 4-hour chart shows a clear ascending channel at the base of the large drop from $10,000, commonly referred to as a bear flag. There is debate as to whether this qualifies, as the price has been traveling in this pattern for longer than would be expected from a classic flag. While ascending channels more often break down than up, the risk/reward for a long position near the channel bottom justified a position with a tight stop.
You read that correctly – I took a long position against the trend, even when the price was likely to continue down, which is something I often do when the potential reward is mathematically far greater than the small loss. Further, price reversals often begin as ascending channels, as there are few ways for the price to bottom out and then continue up.
I also like taking trades at the bottom of ascending channels, because it offers the opportunity for a tight stop that can be moved up with the ascension of the channel over time. Your stop loss naturally reached the point of entry if the trade remains valid.
I was watching the price action closely and identified a hidden bullish divergence with the Relative Strength Index (RSI) on the 4-hour chart. The price was near the bottom of the channel. As mentioned earlier, I prefer to set orders above the perfect entry or support, because trades are often front run when everyone is watching the same area.
Once the bullish divergence was confirmed and the price bounced a bit, I entered a long trade. The image above shows the ideal setups from the bottom of the potential reversal at $7,908. Fortunately, I managed to enter a bit higher.
I chose three potential targets, although I plan to exit the majority of the trade at the first target. The targets are the equilibrium of the ascending channel, the top of the channel, and the 4-hour supply zone from the beginning of the move down weeks ago.
Bitcoin price is currently at $8,087 and slowly moving towards the first target. The stop loss is illustrated in red on the chart below. My plan is to continuously update this trade as it develops and I intend to move up my stop loss as warranted.
Bitcoin: ‘Most Dramatic’ 2020 Halving Could Cut Supply by $63M a Week
Bitcoin (BTC) advocates continue to focus on the May 2020 block reward halving this week as the impact on price becomes more apparent.
Analysts Excited For High-Stakes Halving
In a Twitter discussion beginning Oct. 18, commentators noted that next year’s event will reduce the amount of new Bitcoin in circulation up to $63 million per week at current prices.
The block reward refers to the amount of new Bitcoins miners receive for mining a new block. Currently 12.5 BTC, after the halving, the reward will fall to 6.25 BTC.
Previous halving events have triggered upward price motion, leading to suggestions that 2020 will be no different. Additional studies, notably the popular Stock-to-Flow model, have corroborated the theory that Bitcoin price must surge as the mining reward decreases.
Comparing historical data, Crypto Rand noted that the 2012 and 2016 halvings removed $302,400 and $8.19 million per week from circulation respectively. 2020’s “most dramatic” halving, the analyst forecast, will remove $63 million.
Investor Alistair Milne broadly agreed, adding that at its current price of $8,200, there will be $51.7 million less in new Bitcoin each week.
“To those that think Bitcoin’s inflationary schedule is less effective with time … At current values (~$8200), 2020’s halving will remove $51.7million/week of newly mined Bitcoin from the sell-side,” Milne summarized on Monday.
Price On Track For Gains
As Cointelegraph reported, Bitcoin’s drop to $8,200 placed it firmly in line with the Stock-to-Flow model’s expectations. Previously, when the price was higher, it was effectively “front-running” the historically accurate measure.
Nonetheless, the positive outlook is not shared unanimously. In an interview earlier this month, Jihan Wu, co-founder of mining giant Bitmain, warned the halving may not necessarily lead to the return of bullish sentiment.
“There are many uncertainties, but now is a good time to invest in crypto mining,” he said. Bitmain plans to operate the world’s biggest Bitcoin mining farm in Texas, the company revealed in a press release on Monday.
Bitmain CEO Ousts Co-Founder, Biggest Shareholder To ‘Save The Ship’
Altcoin Bitcoin Cash (BCH) has surged 10% in the past 24 hours after it emerged mining giant and major supporter Bitmain had fired a senior executive.
Wu To Staff: Do Not Talk To Micree Ketuan Zhan
In a translation of an email from Oct. 29 quoted by crypto news outlet CoinDesk, Bitmain co-founder Jihan Wu said that fellow co-founder Micree Ketuan Zhan had left the company.
“Bitmain’s co-founder, chairman, legal representative and executive director Jihan Wu has decided to dismiss all roles of Ketuan Zhan, effective immediately,” it reportedly read.
Wu further offered a warning to those who continued to interact with Zhan:
“Any Bitmain staff shall no longer take any direction from Zhan, or participate in any meeting organized by Zhan. Bitmain may, based on the situation, consider terminating employment contracts of those who violate this note.”
Zhan is Bitmain’s biggest shareholder, with a reported 60% stake.
“I Have Come To Save This Ship”
Zhan’s sudden departure marks the latest chapter in a series of unexpected occurrences at Bitmain. As Cointelegraph reported, Wu himself suddenly abandoned his post as CEO of the company in November 2018, instead taking on a non-executive role on its board.
Reacting to the email, private investor Dovey Wan described Wu’s tone as “intense” in the original Chinese version.
“WOW THIS IS MORE DRAMATIC THAN I THOUGHT,” she summarized on Twitter. According to Wan, Wu told employees that he intended to take control in order to improve Bitmain’s waning share of the Bitcoin mining pie.
“Jihan, literally said to his employees ‘I have to come back to save this ship (from sinking),’” she added.
Bitcoin’s continued strength in 2019 has nonetheless been a boon for Bitmain and other miners. Last week, executives announced they intended to create the world’s largest mining facility in Texas.
Bitcoin Cash, on the other hand, has failed to produce similar successes. Bitmain is an open supporter of Bitcoin Cash, with Wu notoriously vocal about his own belief in the coin.
Bitcoin May See November Price Boost With Halving Due in Six Months
Bitcoin tends to pick up a strong bid six months ahead of the reward halving, according to historical data.
With the halving event due in May 2020, BTC may rise above the recent high of $10,350 in November and could challenge the 2019 high of $13,880 over the next couple of months.
Shorter term, a contracting triangle breakdown on the hourly chart suggests scope for a drop to $8,820 in the next 24 hours. The bear case would be invalidated if prices rise above the hourly chart resistance of $9,245.
A quick move above $9,245 and a rally to the 100-day average at $9,606 shouldn’t be ruled out, as the recent pullback from $10,350 lacks volume support.
Bitcoin will likely put on a good show in November with a price-positive event due in six months.
The number one cryptocurrency by market value is leaving October on a positive note, having recovered sharply from five-month lows below $7,500 seen a week ago.
The rally could be extended further next month, as the cryptocurrency is set to undergo a mining reward halving in May 2020. The process is aimed at curbing inflation by reducing the bitcoin reward per block mined on the blockchain by 50 percent every four years.
Currently, miners get 12.5 BTC for every block mined. That will drop to 6.25 BTC after the halving, meaning 50 percent fewer bitcoins will be generated every 10 minutes. To put it another way, the supply of new coins will drop by half after May.
In the past, the cryptocurrency has picked up a strong bid six months ahead of the reward halving.
Bitcoin’s block reward was cut from 50 BTC to 25 BTC in November 2012. BTC rallied from $5 to $16 in the three months to mid-August and built a new base around $10.00 in November.
On similar lines, BTC jumped from $360 to $780 in the four months to mid-June 2016, before trimming gains and falling back to $465 in August, when the block reward was cut from 25 BTC to 12.5 BTC.
The data indicates the market begins pricing in an impending supply cut six months in advance.
So, if history is a guide, BTC may rise well above the recent high of $10,350 in November and could challenge the 2019 high of $13,880 over the next couple of months.
Adding to the likelihood of a rally, bitcoin has scored gains in November in six out of the last eight years.
Notably, November was a green month for six straight years from 2012 to 2017. The winning run ended last year with a 37 percent drop – the biggest November loss on record. Back then, however, BTC was in a bear market. The cryptocurrency had already dropped 70 percent from the record high of $20,000 reached in December 2017.
This time, the overall trend is bullish, as indicated by the triple-digit year-to-date gains. BTC, therefore, is likely to revive the November winning tend.
Currently, bitcoin is changing hands around $9,100 on Bitstamp, representing a 0.2 percent drop on a 24-hour basis. The cryptocurrency is trapped between key moving averages (MAs), as seen in the chart below.
Bitcoin has come under pressure in the last 24 hours, as expected, but the downside is being restricted around the 200-day MA, currently at $9,025.
The contracting triangle breakdown seen on the hourly chart indicates that bitcoin could drop further to the former resistance-turned-support of $8,820. A violation there would expose next support lined up at $8,474.
The outlook, as per the hourly chart, would turn bullish above the lower high of $9,245. A quick move above $9,245 cannot be ruled out as the recent pullback from $10,350 is accompanied by a drop in trading volumes. A low-volume correction is often short-lived.
A break above $9,245 would likely yield a retest of the 100-day MA at $9,606. Note that BTC has failed three times in the last five days to hold on to gains above the long-term average. As a result, a UTC close above the 100-day MA could embolden bulls, leading to a sustained move above $10,000.
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