Ultimate Resource For Bitcoin Halving
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.
Halving Will Be ‘Non-Event’ For BTC Price: Morgan Creek Digital Exec
Bitcoin’s (BTC) 2020 block reward halving continues to generate mixed opinions regarding price performance, as one analyst suggests its impact will be next to nothing.
In a tweet on Dec. 1, Jason Williams, co-founder at digital asset fund Morgan Creek Digital, said that unlike many others, he believed markets would not move as a result of the halving next May.
Williams: BTC Halving Will Be “Non-Event”
“Bitcoin halving in May 2020 won’t do anything to the price. It will be a non-event,” he summarized.
Bitcoin’s block reward halving will reduce the amount of BTC paid to miners for each block from 12.5 BTC to 6.25 BTC. As Cointelegraph reported, the event is broadly expected to become a catalyst for a bull market.
Analysts diverge over when the reaction might take place — opinions range from several months before the halving to several months after it.
At the same time, as statistician Willy Woo noted two weeks previously, Bitcoin’s current position marks a sharp contrast to the bullish setup to its previous two halvings. 2020, he concluded, will be a “unique” first for Bitcoin.
Others, such as mining giant Bitmain’s CEO Jihan Wu, share Williams’ lack of excitement. Cointelegraph also released an alternative outlook for Bitcoin over the halving.
Rumors Abound Over “Unique” Halving
The multitude of factors that could potentially influence the halving’s effect has even led to disagreements within the same small group of market participants.
Anthony Pompliano, a fellow Morgan Creek Digital co-founder well-known for his Bitcoin advocacy, previously implied that at $7,200, BTC/USD has yet to benefit from the halving.
“The Bitcoin halving is not priced in,” he tweeted on Nov. 10. At the time, BTC/USD traded at around $8,750 — 20% higher than at press time.
According to a historically accurate Bitcoin price model, meanwhile, the long-term impact on the halving is all but assured. By 2022, the Stock-to-Flow tool predicts, BTC/USD should have jumped to over $100,000.
The model’s creator, PlanB, doubled down on the figure in October while acknowledging that its accuracy may not last beyond the next few halving events.
Bitcoin Halving, Explained
1. What is Bitcoin halving?
An event that halves the rate at which new Bitcoins are created. It occurs once every four years.
As many know, Bitcoin’s (BTC) supply is finite. Once 21 million coins are generated, the network will stop producing more. That is one of the main reasons Bitcoin is often referred to as “digital gold” — just like with the yellow metal, there is only a limited amount in the world, and someday, all of it will have been extracted.
Right now, there are around 18 million BTC in circulation, which is roughly 85% of the total cap — but it doesn’t mean that the cryptocurrency is about to reach its limit any time soon. The reason is the protocol, which has been coded into the blockchain from the very start: Every 210,000 blocks, it performs the so-called Bitcoin “halving” or “halvening,” and producing new coins becomes more difficult — just like in gold mining where finding new deposits becomes more challenging over time.
More specifically, the protocol cuts the block reward in half. So, every time a Bitcoin halving occurs, miners begin receiving 50% fewer BTC for verifying transactions.
2. Ok, But What’s A “Block Reward”?
In short: the amount of BTC a miner receives for every new block they add to the blockchain.
To explain this concept in more depth, let’s briefly go back to the roots of Bitcoin — the blockchain. In the most basic sense, a blockchain is a digital ledger that stores information about its transactions in blocks that are each around 1 MB in size. For instance, when person A sends Bitcoin to person B, this transaction will be stored on a block, along with around 500 other transactions that happened at around the same time.
A block reward is the amount of cryptocurrency that miners receive when they successfully validate/mine a new block by solving highly complex mathematical problems with their mining hardware. It is a reward for their hard work.
3. How Much Bitcoin Will Miners Receive After The Next Halving?
Every new block will produce 6.25 BTC. At inception, the reward was eight times as much.
When Bitcoin was launched in 2009, miners were receiving 50 BTC per block. Thus, a total of 10,500,000 BTC was generated before the next halving took place in November 2012, when miners began to receive 25 BTC for each block.
It may seem like an overly generous bonus (more than $365,000 per block, based on current value), but the network was only just starting to develop at the time, and no one knew for certain whether people would continue to find the concept worthy of investing their computer processing power into the Bitcoin blockchain to keep it alive.
Another fact to take into account is that the all-time high market price for that period was $31 per BTC in June 2011, but that “bubble” later burst and Bitcoin was back to $2 before the year’s end.
Nevertheless, mining has ultimately turned out to be much more profitable for those who got in early, which is a big part of the reason Bitcoin critics call it a Ponzi scheme.
The second Bitcoin halving occurred on July 6, 2016, as block number 420,000 was produced and miners began collecting 12.5 BTC for every new block, which is the current rate. The third halving will reduce that rate in half yet again, which will lower the block reward to just 6.25 BTC, or around $45,000 given the current market price.
4. When Will The Next Bitcoin Halving Take Place?
The week commencing 18 May, 2020, based on current performance, but it might be 14 May.
The date is not 100% certain at this point because the time taken to generate new blocks may speed up or slow down. On average, the network produces one block every ten minutes.
The very last halving is expected to occur some time in the year 2140 as the 21-millionth BTC is mined. Once that happens, miners will stop receiving block rewards, but will keep the remaining source of revenue — fees paid by the transactions, which they also collect.
5. Will Bitcoin Miners Still Be interested?
Some smaller players might be forced to leave (or at the very least, upgrade their hardware).
At this point, the majority of Bitcoin mining is performed by giants like Bitmain, the China-based company that was worth $12 billion at some point in 2018. Bitmain validates blocks with thousands of loud, extremely powerful and high-energy-consuming machines called application-specific integrated circuit miners, which are much more efficient compared to the basic setups used by students or other individuals.
As the block reward becomes less significant, mining rigs that are barely covering production costs will be forced to quit the market. There will still be firms willing to mine Bitcoin at the reduced rate, but the market might become less decentralized as a result (i.e., the pie will be cut into fewer pieces). Still, new and more efficient ways to mine BTC could emerge, potentially enabling smaller businesses to partake.
6. Will The Bitcoin Price Change?
Historically, the price has gone up following a halving, but it ultimately depends on the supply/demand ratio.
Essentially, Bitcoin halving cuts down the supply of BTC, making the asset more scarce. If the demand is there, the price is likely to increase. There are also some historical precedents. On Nov. 28, 2012, the day of Bitcoin’s first halving, the cpryptocurrency’s price rose from $11 to $12, and continued to climb up throughout the next year, reaching $1038 on Nov. 28, 2013.
Roughly four years later, a month before the second halving, Bitcoin’s price started to follow a similar, bullish pattern. It surged from $576 on June 9 to $650 on July 9, 2016 — the day the block’s reward was reduced by half for the second time in the asset’s history. Again, BTC continued to accelerate through the next year, albeit with occasional turbulence, and traded at $2526 on 9 July 2017.
Will it be the same next time? Skeptics believe that the halving has already been priced in (remember this year’s epic, but short-lived systematic price increase?). Although, there is no scientific way to verify this.
Moreover, the industry has drastically changed over the last four years, as cryptocurrencies — and Bitcoin in particular — became an essential part of mainstream news coverage. Still, some people might be tempted to take the chance, especially given the previous patterns exhibited around Bitcoin halvings.
Consequently, if history repeats itself and the Bitcoin price starts going up in April 2020, even more traders might start buying the asset out of a fear of missing out, thus stimulating the demand, and, ultimately, the price.
Google Trends: Bitcoin Halving Refutes ‘Nonexistent’ Retail Interest
Bitcoin (BTC) investors and mainstream consumers are paying more attention to the cryptocurrency’s block reward halving in May 2020.
According to data from Google Trends on Dec. 17, worldwide searches for “Bitcoin halving” have significantly increased in the course of 2019, over a year before the halving occurs.
BTC Halving Can Provide Bullish Narrative
Within the context of the past five years, interest is palpably higher, with only a brief period around the previous halving in 2016 seeing higher global search volumes.
By contrast, results for “Bitcoin” have declined in recent months, echoing the lack of interest associated with the cryptocurrency’s price decline.
As Cointelelrgaph reported, both search terms saw increased activity in late November, when Bitcoin markets entered a brief period of growth.
Nonetheless, the heightened profile of the halving in particular did not go unnoticed among analysts. Commenting on the data, Adamant Capital co-founder Tuur Demeester noted that many still perceive the halving as a Bitcoin price catalyst.
“It’s very clear that retail interest in BTC is nonexistent and investor sentiment is pretty bad right now. Question is whether the halvening could provide a bullish narrative – the Google trends data imo suggests it could,” he wrote on Twitter on Tuesday.
All Eyes On Miners
The halving refers to the number of “new” Bitcoins claimed by miners for each block of transactions decreasing by 50%.
In 2020, the reward will go from 12.5 BTC to 6.25 BTC, increasing competition which some say has already affected miner behavior in advance.
In recent weeks, BTC/USD has conformed to the hypothesis that miners would defend a certain price floor which corresponds to their production cost of around $6,500.
Meltem Demirors on Government Digital Currencies and Why ‘The Halvening’ Gets Weird
One of CoinDesk’s ten most influential people of 2019, Meltem Demirors is a crypto renaissance woman, known best for investing, operating as CSO of CoinShares, and for explaining ‘shitcoins’ to Congress.
In this end of year Breakdown, Meltem argues explains why the entrance of governments to the digital asset game is the most significant story of 2019, as well as suggesting that the presence of an entirely new financial infrastructure around bitcoin means the halvening is likely to be unlike what anyone thinks.
Bitcoin’s Halving Captures Growing Interest – Among Google Searchers
Bitcoin traders are split on whether the cryptocurrency’s once-every-four-years “halving” will jolt prices toward 2017’s all-time-high near $20,000 or multiples of that.
What’s clear is interest in the topic is surging on Google, according to a report from the Norwegian cryptocurrency analysis firm Arcane Research.
The search engine’s Google Trends feature shows queries on the term “bitcoin halving” have doubled this month from December levels to the highest since the last such event in 2016.
According to Arcane Research, the increasing number of Google searches is a sign the halving might be capturing greater public interest as a potential catalyst for higher prices in 2020.
“The bitcoin halving is gaining more traction,” Arcane said Friday in the report. “There is now a clear indication that awareness of the concept is spreading to new people.”
Google Trends doesn’t disclose the actual number of searches on “bitcoin halving” but does publish data showing the search term registered a reading of 35 during the week ended Jan. 19, up from an average 15 during the month of December. The scale is normalized so that a reading of 100 represents the peak of a particular search term’s popularity.
For “bitcoin halving,” that happened in 2016, when the last such event occurred. Bitcoin prices doubled that year and surged by 13 times in 2017.
The halving was codified into bitcoin’s underlying software code when the cryptocurrency was launched just over a decade ago. Every four years, the bitcoin network undergoes a 50 percent reduction in its “mining rewards” – essentially the number of new units of the cryptocurrency issued as rewards to computer operators that are working to confirm data on the underlying blockchain network.
Some crypto investors say the event could boost bitcoin’s price because the pace of new issuance will decrease at a time when more investors are considering getting into, or increasing their allocations of, the cryptocurrency. As an investment, bitcoin has outperformed traditional assets like equities, with a price jump of 94 percent in 2019 that was roughly triple last year’s gains in the Standard & Poor’s 500 Index of large U.S. stocks.
Analysts for the German bank BayernLB predicted last year the halving could send bitcoin to a new record around $90,000, but some investors maintain that the event is so well telegraphed and understood that it’s likely already reflected in the market price, currently around $8,500.
Within the crypto industry, the halving is highly anticipated. Some enthusiasts have even created a dedicated website to count down the remaining days, hours, minutes and seconds until it happens. According to the site, bitcoinblockhalf.com, the event will take place on or around May 12 – now just 108 days away.
But while it appears more are interested in what the term signifies, Arcane Research noted “bitcoin halving” still garners far fewer searches than just “bitcoin.” According to Google Trends, “bitcoin” by itself garnered at least 30 times more searches than “bitcoin halving.”
$12 to $12K: The $100,000 Bitcoin Halving Is Just 100 Days Away
Bitcoin (BTC) is just over three months away from having its supply cut in half — and major market commentators are unashamedly bullish on its impact.
In a tweet on Feb. 1, rating agency Weiss Ratings presented a summary of Bitcoin price performance over its two previous block reward halvings.
Weiss: Halvings “Absolutely” Help BTC Price
Halving refers to the number of new Bitcoins awarded to miners for each block of transactions they validate.
During the first event in late November 2012, BTC/USD traded at just $12. Four years later, the supply halved to the current rate of 12.5 BTC per block, and the price was $652.
With Bitcoin gaining over 30% in January alone to hit $9,450, expectations are now higher than ever that the May 2020 halving will produce serious price action a lot closer to $12,000 than $12.
“So, does the Bitcoin halving help drive prices higher? Absolutely,” Weiss summarized.
“The only question now is how high will #BTC go this time around?”
Bitcoin Set To Beat Gold, Fed Inflation
The impact of the 2016 halving was somewhat delayed. In the event, Bitcoin only shot to all-time highs of $20,000 in a bull run which began a year later.
Similarly, some analysts expect a latency period to accompany the May block reward halving to 6.25 BTC.
As Cointelegraph reported, however, other statistics make 2020 an even more conspicuous year for Bitcoin. In terms of inflation, for example, the halving will reduce Bitcoin’s rate to less than that of both gold and the Federal Reserve’s target for the United States economy.
In 2021, according to one historically accurate price model which demonstrates the knock-on effect of Bitcoin supply reductions, BTC/USD should hit a new all-time high of $100,000.
Coinbase Says Bitcoin Will Become Closer To Digital Gold In 93 Days
With May’s Bitcoin halving event drawing ever closer, Coinbase recently took to pushing the “Bitcoin as digital gold” narrative. In a tweet-storm to promote an accompanying blog-post published Feb. 7, it covered the key reasons why the halving and subsequent supply rate reduction will further cement that link.
Scarcity Creates Value
Since the gold standard was broken in 1971, the dollar’s value has declined and gold’s value, in dollar terms, has risen over 4000%. Gold has more value than similar metals such as copper due to its relative scarcity and difficulty to acquire.
Bitcoin has been designed to be scarce like gold and is artificially difficult to acquire through the Proof-of-Work process of mining. However, it also has an advantage over gold in being transferable through a communications channel.
“Armed with a myriad of technological advantages, accelerating development, and maturing global market, Bitcoin is a store of value to rival gold in the digital age.”
Halving Increases Scarcity
The supply of Bitcoin is limited by design, with new tokens being minted as a reward every time a block of transactions is mined. The initial reward level of 50 BTC per block has already undergone two halving events, bringing it down to the current 12.5 BTC per block.
After the May 2020 halving, mining rewards for each new block, mined approximately every ten minutes, will reduce to 6.25 BTC. This will bring the supply issuance of Bitcoin to a rate of around 1.7% per annum.
Stock-to-flow (S2F) is a measure of new supply rate over total supply, and post-halving, Bitcoin’s S2F scarcity will be on a par with gold’s.
“Gold’s stock to flow is higher than any other metal commodity, and bitcoin is set to soon follow,” notes Coinbase.
No Value Without Demand
S2F forecasts for the price will fail if there is no demand, and this holds true for fiat money, as much as any other commodity. As central banks increase the money supply, economies can sometimes prosper. However, if money supply overwhelms demand then hyperinflation events can occur.
Such events drive demand for safe havens such as gold and Bitcoin, and recent economic fear is reaching all-time highs, according to the Global Economic Policy Uncertainty Index.
This, along with Bitcoin’s myriad of technological advances and accelerating development, justifies Bitcoin’s title as digital gold, according to Coinbase.
As Cointelegraph reported, senior employees of Coinbase and Ripple recently formed a working group to advise United States regulators on policies to encourage innovation in the sector.
Bitcoin $727B Annual Investment Flow Can Beat Visa Next Halving — Data
Bitcoin (BTC) is already processing 1% of the world’s GDP and the number is growing by “an order of magnitude” every halving cycle.
According to statistician Willy Woo, who analyzed data from monitoring resource Coin Metrics, Bitcoin’s investment flow is $727 billion annually.
BTC Processes $727B Per Year
The number is almost 10% of payment processor Visa’s transaction volumes each year — Visa processes $8.8 trillion in transactions.
“Bitcoin’s investment flow (aka annual investment velocity) is presently growing an order of magnitude (10x) every 4 years,” Woo summarized.
Per the statistics, Bitcoin should “catch up” with Visa at some point after its next halving cycle, which begins in May. As Cointelegraph reported, smaller fiat operators such as PayPal are already falling by the wayside — in 2018, PayPal processed a total of $578 billion.
Woo acknowledged the data for Bitcoin was only an estimate and may include movements between cold wallets held by exchanges, which would not constitute true transactions. Circular payments between wallets, as well as multi-hop transactions with multiple steps, were excluded.
Small Wallets Hit Record Highs
The impressive statistics come as fresh highs in the number of low-balance Bitcoin wallets suggest that more and more private investors are experimenting with the cryptocurrency.
According to Glassnode, there are now more wallets than ever with a balance greater than or equal to both 0.01 BTC ($101) and 0.1 BTC ($1,080).
Nonetheless, both private and institutional investors have been found to reward convenience over security when it comes to crypto fund storage. A recent survey revealed that more than 9 in 10 institutional investors, for example, used trusted third parties such as exchanges to store their coins.
An industry effort, dubbed “Proof of Keys,” aims to raise awareness of the importance of self-ownership of wallet private keys, but its success so far is difficult to estimate.
Are Miners Prepared For The Halving Of Bitcoin?
Anyone following crypto news has undoubtedly seen numerous articles that forecast Bitcoin’s (BTC) valuation following the upcoming halving slated to take place in May of this year. And although the price of Bitcoin is clearly important to the industry and investors at large, planning for the halving is particularly critical to cryptocurrency miners.
Once the halving occurs, the unfortunate truth is that the profitability of all but the most efficient mining operations will be greatly challenged. To stay in the green, many will either be forced to upgrade their equipment or to shut down their mining operations altogether.
However, careful planning can mitigate these risks, and there are several steps miners should take to set themselves up for sustained profitability in the wake of the halving. To understand all the factors at play, it’s important to review what makes mining profitable in the first place. This includes:
Hash Rate And Difficulty.
And the exchange rate of BTC to USD.
Hash Rate And Difficulty
The hash rate is the estimated number of tera hashes per second that the Bitcoin network is performing. It is a general measure of the network’s processing power and of how many times the network can attempt to add a block to the Bitcoin blockchain every second.
The hash rate is a good indicator of the network’s health, and while it can’t be precisely measured, it can be estimated based on the current difficulty and time of block confirmations of Bitcoin.
Mining Bitcoin is not easy, and it has only gotten harder as more miners have joined the network. The difficulty of mining a block correlates with the overall network hash rate, and thus with the competition. The more people trying to solve a block, the more difficult it is to do so.
Miners can increase their chances by employing high-powered application-specific integrated circuits that are efficient and always running. The ultimate goal is to solve a block that is worth more than it costs to solve. Miners can also improve odds by joining a mining pool, in which profits are shared with the other members of the pool and vice versa.
It’s not expected for the halving to have a big impact on mining difficulty. It may adjust slightly to make up for no-longer-profitable miners leaving the network, which will allow for the remaining miners to mine more profitably and to drive forward the hash rate, price and difficulty in general.
The electrical efficiency of mining devices has a massive impact on overall profitability. If miners are expending excess energy and paying more in electrical costs than receiving as a result of solving a block, they’re going to end up in the red.
A more efficient device will lead to greater profits in less time while also expending less energy, thus, reducing costs. Such efficient machines are going to be needed to correct for the reduction in block reward following the halving. Machines, such as the Antminer S9, are going to become essentially obsolete and will need to be replaced with newer, more efficient miners like the Antminer S17.
The power cost also has a big impact on profitability and is directly related to the power consumption — as well as to the cost of electricity at the mining operation. As more efficient machines are needed to keep up with the reduced revenue following the halving, miners will need to run operations in a place with low energy costs.
Mining colocation centers offer high power and low costs of energy, along with several other benefits, such as 24/7 security and equipment oversight. It’s strongly suggested that miners consider state-of-the-art facilities throughout the country to help them make the most of their operations at a fraction of the cost and consumption.
This is what halving is all about. The current block reward of 12.5 BTC will be halved to 6.25 in the spring, and the revenue of all miners on the network will be cut in half, as well. The only way to make up for this is to increase mining power and reduce operational costs.
Exchange Rate Of BTC To USD
The price of Bitcoin has historically responded well to previous halvings — for those miners capable of remaining in the market after the fact. However, this has been the subject of considerable debate in the crypto community, and although opinions vary, the outlook is bullish.
Looking Ahead By Looking Back
The bottom line is that when the Bitcoin block reward halves, so will the total revenue generated by all miners. If the hash rate, power consumption and power cost all stay the same as they were before, it’s likely that a mining operation will be unprofitable if the hardware hasn’t been upgraded to remain competitive.
When getting into this space, it’s essential to keep emotions out of the equation. It’s best to rely on the numbers and objectively analyze trends and key indicators to set oneself up for the best chance at success.
This is certainly easier said than done in today’s environment, as social media, family and friends have made it easier than ever to become influenced by outside sources. Still, it is important to understand that long-term trends are more indicative of where the market is headed than are random fluctuations.
Looking back at the last two halving events in 2012 and 2016, both led to new market highs for Bitcoin’s price within a year to a year and a half.
No doubt that the upcoming halving will impact the market, and although we can’t know for certain what will happen, if the demand for Bitcoin remains the same and scarcity is greater, the expected response would be to see the price increase. By how much, it is hard to say.
For those committed to the long-term play, good planning and investing in the latest hardware seems prudent. Going a bit further, for those who don’t host their own mining equipment, analyzing hosting options and locking in competitive pricing now in a multi-year contract can help manage costs in the coming months.
The best piece of advice for miners: Assess your needs today and well in advance of the halving. As Benjamin Franklin once famously noted, “If you fail to plan, you are planning to fail.”
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Dave Perrill is the CEO at Compute North. A 25-year veteran of the IT and information security industry, Perrill has been keenly immersed in the cryptocurrency mining industry and blockchain technology since its formative days.
He founded and subsequently sold two technology companies, including an Internet Service Provider/Managed Security Provider, SecureConnect, which was acquired by Trustwave Holdings in 2012. He also has extensive experience in networking, data center engineering, scaling large IT systems and security.
Bitmain Recovers, Claims Profits Despite Pandemic And Power Struggle
Chinese cryptocurrency mining hardware producer Bitmain is now poised for a rebound after hitting a rough patch.
Chinese cryptocurrency hardware manufacturer Bitmain seems to be bouncing back after a streak of dismal reports. Earlier this week, a local industry blog revealed that the mining giant has accumulated over $300 million in revenue so far this year and is rewarding employees with massive bonuses on Labor Day.
Bitmain has since confirmed that information to Cointelegraph but ignored additional questions. Therefore, how does a mining company go about scoring profits amid the pandemic and the Bitcoin halving frenzy, the latter of which is said to shake things up for miners?
A Brief Recap Of Bitmain’s Fluctuations
Bitmain was founded in 2013 by Jihan Wu and Micree Zhan. At the time, Wu was a private equity fund manager, while Zhan was raising funds for his TV streaming startup. Wu had allegedly spent all his savings on Bitcoin (BTC) and was looking for a way to accumulate more of the asset through industry-scale mining.
In November 2013, Wu and Zhan developed an ASIC chip that allowed to mine BTC at full capacity, thus revolutionizing the industry that had been fully reliant on less-efficient CPU setups. Bitmain’s sales soon skyrocketed (despite some turbulence caused by Mt. Gox) and by mid-2018, the company was valued at $15 billion after reportedly closing a pre-initial public offering funding round.
Around the same time, Bitmain announced its plans to expand into the field of artificial intelligence as the Chinese government began applying more pressure to the mining industry. Apparently, it was Zhan’s idea to open up an AI arm, while Wu was not fully supportive of that direction and even reportedly once called Zhan’s plan “crazy” during an internal meeting.
As Bitmain began preparing for an IPO, the company hit another rough patch due to the crypto winter that was intensifying at the time. As a result of the collapsed BTC price, Bitmain purportedly sold a substantial amount of its mining equipment at a loss throughout 2018, hoping to secure the majority of the market share for better times.
Additional reports suggested that the mining giant introduced austerity measures that included massive layoffs and the suspension of its colossal $500-million blockchain data center and mining facility in Rocksdale, Texas.
By January 2020, Bitmain’s market share by hash rate had ostensibly dropped from around 75% to 66%, while an additional report came out suggesting that the mining titan is planning to reduce its workforce by another 50% prior to the upcoming Bitcoin halving — which will cut the amount of BTC awarded to miners by half.
On top of everything else, Bitmain’s plan to go public via the Hong Kong Stock Exchange eventually stalled, as companies that were previously listed as Bitmain investors began denying their involvement in the IPO.
Wu vs. Zhan
In addition to the aforementioned problems, the company has found itself in the midst of an ongoing legal battle between two of its co-founders. The issue sparked in October 2019 when Wu, who abandoned his post as CEO of Bitmain in 2018 to take on a non-executive role on its board, suddenly ousted Zhan, who was the firm’s partner and chairman at the time, from Bitmain.
According to the alleged transcripts of an internal meeting that supposedly took place one day prior to the incident, Wu told Bitmain employees that he was going to take matters into his own hands and improve Bitmain’s declining share of the Bitcoin mining pie. Additionally, he forbade staff to have any interaction with the ex-senior executive, threatening to fire those who don’t conform, and took over the company as a legal representative.
Zhan started to fight back, filing two lawsuits against Bitmain. He submitted the first one in December 2019 to a court in the Cayman Islands where Bitmain Beijing — the firm’s holding entity — is registered, while the second lawsuit was brought in last month against the company’s AI subsidiary, Fujian Zhanhua Intelligence Technology, in a Chinese court.
“If someone wants a war, we will give them one,” Zhan reportedly claimed, arguing that he owned 36% of the company’s equity.
In January, Wu handed over the company’s legal representative post to Luyao Liu, the CFO of Bitmain. However, the Beijing Haidian District Bureau of Justice has recently overruled that appointment after Zhan had appealed the decision in February. It was a partial victory for Zhan since the court didn’t uphold his request to appoint him as Bitmain’s legal representative but disrupted the distribution of power within the firm by Wu.
The $300-Million Turnaround
Despite the legal problems, it looks like the winds are finally changing for Bitmain. On April 29, a Chinese industry blog published a report suggesting a number of positive changes for the mining giant. Bitmain later confirmed the information to Cointelegraph that it had earned over $300 million in the first four months of 2020 and regained some market share, as it opened four new mining facilities and saw the hash rate increase in two of its mining pools.
Bitmain has also confirmed that it will be rewarding its employees with individual bonuses of up to 70,000 yuan (about $9,900) on Labor Day, which is scheduled for May 1. The bonus payments would amount to “millions of yuan.”
Additionally, Bitmain has streamlined its AI department’s operation. Namely, the company has developed the software for image recognition of rare birds to assist wildlife protection agencies, among other AI projects. Philip Salter, the head of mining operations at Genesis Mining, is not surprised by the company’s performance. Salter told Cointelegraph:
“They have the very profitable S17+ product and, of course, now the new S19. Bitcoin prices have been low, which reduces Bitmain’s opportunistic prices. And this means that large miners could have placed large orders to stock up on equipment at low prices!”
The COVID-19 pandemic, which has reportedly dwarfed China’s mining operations and forced some facilities to shut down, doesn’t seem to be stopping Bitmain either. In a recent comment for Cointelegraph, the company’s representative said Bitmain is following professional advice for dealing with the pandemic while continuing to sell its Antminer rigs.
Salter suggested that Bitmain could have even reached an agreement with the Chinese government to continue its operation during the lockdown:
“Who knows, maybe Bitmain had some special deals with the government to continue production of miners? I would not be surprised if high-value companies like Bitmain get exceptions from the rules.”
As for the upcoming Bitcoin halving, it is not likely to cause Bitmain any serious financial problems — if anything, it will drive off weaker actors, as Mark D’Aria, the CEO of Bitpro Consulting LLC, suggested in an email conversation with Cointelegraph:
“The halving is going to be toughest on the hardware manufacturers producing the least efficient hardware, and on the miners with the least efficient operations. Difficulty will adjust to a new normal quickly, and the weakest of both will be flushed out. Once hashrate has adjusted, we will definitely see some clear winners and losers.”
The halving will create margin pressure on many miners if Bitcoin remains below $9K, primarily the inefficient ones, Matt D’Souza, the CEO of crypto mining hardware broker Blockware Solutions, told Cointelegraph, elaborating:
“A majority of old generation and mid-generation equipment is going to have to shut off. If Bitcoin is at $9K or below, you can expect about 20%–30% of the network to shut off. If $9K remains for several weeks beyond the halving, it will create a health cleanse for the network.”
Alireza Beikverdi, the CEO of crypto exchange software firm bitHolla, is also confident about Bitmain’s future, as he recalled his visit to the company’s headquarters in a conversation with Cointelegraph:
“Bitmain has a big monitor in the middle of their office, and you would expect it to show Bitcoin hash rate, their sales stats, or maybe their new models, etc. But, instead, it’s only displaying Bitcoin price.”
Price volatility can make a big difference for mining companies and their future operations, Beikverdi continued, meaning that it is considered one of the most important metrics. Bitmain controls two large mining pools, Antpool and BTC.com, which account for over 30% of the entire Bitcoin network. “They have multiple business streams that are not really affected much by the pandemic as long as Bitcoin price stays strong,” Beikverdi summed up.
Future Plans: IPO In 2020?
Bitmain has made strong statements against the backdrop of the recent good news. It has heavily criticized the Beijing Haidian District Bureau of Justice’s ruling in a statement, going as far as to argue that it has violated corporate laws. The firm has also reassured customers and investors that the results of the ongoing squabble between Wu and Zhan will not have any impact on Bitmain’s production or operation, while the AI arm will remain under the firm’s control.
Should the court go ahead and register Zhan as the legal representative of Bitmain Beijing, the corporation will allegedly remain unfazed. Bitmain Beijing is just one of the more than 10 subsidiaries of Bitmain, it noted.
Meanwhile, toward the end of 2019, the mining juggernaut quietly filed a Deutsche Bank-backed application for an IPO with the United States Securities and Exchange Commission, meaning that it might continue its comeback by going public in the future — maybe even sometime later this year.
Here Are the Options: Bitcoin Derivatives Give BTC Halving Insight
The Bitcoin price is surging as the halving approaches, but options data can shed some light on what experts think Bitcoin will do next.
With the halving just six days away, the crypto community is collectively holding on to their proverbial hats and counting down the days until the historic event takes place. Looking back, it’s quite amazing to see what has been achieved in the past four years since the last halving and how much the industry has matured.
Regulation has taken giant leaps, venues have become more sophisticated and transparent, and institutions have begun to dip their toes in the once murky waters of crypto. Along with a reduced supply, all the conditions are perfectly aligned for a post-halving bull run, and that is exactly what many crypto enthusiasts are expecting.
One noticeable proponent of such a result for the halving is PlanB, the anonymous analyst behind the famous stock-to-flow model. Recently tweeting about the event, PlanB expects the Bitcoin price to rise tenfold in the next two years, thus proving that his model can indeed predict the long-term direction of BTC’s price.
Forget The Hype, Here’s The Data
With the price of Bitcoin rallying ahead of the halving and the crypto community being generally optimistic about the upcoming event, others are taking a more sober stance on the price action following the halving, given all the hype surrounding the specific date being an event where people “buy the rumor and sell the news.”
As the price rises in the days leading to the halving, it’s possible that traders will take profits immediately after the event. So what to make of all this? Supply and demand is just one of the things to take into account, and it is, of course, the pillar on which long-term valuation stands, but short-term price volatility does not adhere to that logic, as fear, greed and other man-made factors come into play.
Derivatives data can be extremely insightful, as more complex instruments such as options contracts produce datasets that simply do not exist in the spot markets. As such, here is a closer look at the Bitcoin options data to shed some light on the situation.
Being a highly complex market, Bitcoin options market participants are often considered the most knowledgeable players, and the data sets produced by this complex market can shed a light on where these experienced traders think the price is headed post-halving.
Implied Volatility: Tables Are Turning?
For example, the implied volatility metric can tell a lot about the expected price of Bitcoin within the options market.
When there is a higher premium for a certain strike price on an options contract, it means there is greater demand for these contracts. Data from the largest options market, Deribit, shows that options market players think the downside risk is higher than the potential upside.
However, this can also mean that traders are protecting their long positions on spot markets, including miners, who are inherently long on Bitcoin. Matt D’Souza, CEO of Blockware mining, told Cointelegraph:
“If Bitcoin is further adopted in, mining will likely be more commoditized and institutionalized which will reduce volatility in the price of Bitcoin. Present commodities like gold, oil or soybeans have large, institutional suppliers (Bitcoin miners are the present suppliers). In mature commodities like oil and gold these suppliers hedge their supplier which reduces volatility. This is just starting with Bitcoin. CME futures and options, Bakkt etc. so Bitcoin will mature and volatility will get reduced especially as more institutional players control the supply.”
Looking at the historical data can give an even better insight of how the sentiment is changing with time. The chart below shows that puts are more expensive than calls, which can mean the market thinks the security has a greater chance of falling than it does of rising. However, the trend is starting to favor calls (the upside), so it’s important to keep an eye on how this trend progresses.
According to James Li, analyst at CryptoCompare, the current data favors a cautious outlook on Bitcoin, but that is changing rapidly. He told Cointelegraph:
“With the recent rally, near terms expiries saw implied volatility picked up, whilst longer term expiries dropped. The 15th May contracts which expire right after the halving suggest prices can go both ways, with 25-delta only skewed very slightly to the put side, which means the demand is somewhat stronger on the downside. Longer term expiries, however, remain skewed on the put side but if we see persistent rallies, the sentiment can flip to the other side.”
Put-call Ratio: Bullish Or Bearish?
Another metric to keep an eye on in the Bitcoin options market is the put-call ratio, which has been increasing, rising from 0.62 to 0.70 in the last week. While a rising put-call ratio can be looked at as a bearish sign at first glance, it may also point to a risk-averse market. Bitcoin trader and popular YouTuber Tone Vays told Cointelegraph:
“I think the majority of the people are wrong. A rising put/call ratio should be bullish for BTC price as most of those puts will expire worthless. Puts are also a good hedging (aka insurance) instrument so people that are hodling Bitcoin might be scared that mining will be in trouble and they are buying puts to protect their positions.”
In fact, many advanced traders shared the same perspective as Vays, especially if the ratio goes too far in either direction. D’Souza, who is also a hedge fund manager at Blockchain Opportunity Fund, shared a similar outlook on options, telling Cointelegraph:
“A rising put to call means many investors are buying downside protection. I love it as a contrarian indicator. So when put/call gets extreme or greater than usual, I actually get bullish because I take a contrarian position. I like to do the opposite of the herd. This is most importantly, take the other side for the most part when the ratios go too far in either direction.”
The Elephant In The Room
Although the options market and other metrics can give insight into what traders and other market players expect the BTC price to do, its interpretations should always be taken with a grain of salt. However, as Bitcoin continues to solidify its position as a new asset class, its “classical” volatility and unpredictability will continue to fade away.
In the meantime, it’s also important to take the “elephant in the room” into consideration — that is, the COVID-19 pandemic and the massive wave of unemployment that has come with it. With this in mind, it’s possible that many will be hoping to cash out after the halving in search of safe haven assets.
Stairway To Scarcity: Bitcoin Sentiment To Rise Despite Halving Impact
Post-halving scenario on Bitcoin’s long-term market trust and reputation seems quite positive according to crypto pundits.
With Bitcoin’s (BTC) fourth halving just four days away, members of the global crypto community are eager to see how the event pans out monetarily for the flagship crypto asset. Historically speaking, the halving has almost always had a positive impact on Bitcoin’s price, but this time around, many experts believe that any potential value surges may have already been priced in.
It bears mentioning that the halving will most likely have the biggest impact on miners, as the reduced reward ratio following the event will rapidly alter their profit streams, forcing small-time players to either adjust their operations accordingly or shut down completely.
Not only that, some pundits have commented that the aforementioned “supply shock” could compromise the security of Bitcoin by causing a rapid drop in miner hash power. In this regard, Alex Heid, the chief research officer at SecurityScorecard — an information security company that rates the cybersecurity risks of corporate entities — believes that ransomware attacks will increase as a result of the halving, with miscreants most likely making use of known vulnerabilities and phishing as a means of deployment. So, how is the upcoming halving going to impact BTC’s overall market sentiment and trust?
Traditional Finance Helps Bitcoin
With the coronavirus pandemic currently sweeping the globe, it appears as though more people may be turning to believe that their local monetary systems have some flaws, especially as central banks such as the United States Federal Reserve continue to print an increasing amount of fiat currency as part of its quantitative easing efforts.
Additionally, many governments have made a major push to increase the adoption of digital payment systems as well as other contactless payment mediums to adhere to social distancing measures that have been deemed essential during this time.
Owing to the fact that the aforementioned COVID-19 crisis coincides with the BTC halving, the premier cryptocurrency’s image seems to have improved somewhat in the eyes of investors, who are now beginning to gain a more in-depth understanding of Bitcoin’s self-deflationary and decentralized design. Commenting on the subject, BlockFi co-founder and CEO Zac Prince told Cointelegraph that the halving is a “perfectly timed opportunity for Bitcoin,” adding:
“Current market dynamics are driving a bolstered interest on digital currency for the long run that go beyond a rudimentary understanding of the rules of supply and demand. Historically, past halving events have always resulted in an eventual upswing of BTC.”
Prince further opined that with the Fed printing money to keep the economy afloat, more and more Americans have started to flock toward Bitcoin as a store of value — thus showcasing their long-term trust in the digital commodity. Not only that, he also believes that because Bitcoin was able to successfully bounce back from its pandemic-induced losses recently, an increasing number of people are now beginning to accumulate it in order to diversify their existing portfolios. He added:
“As more people see its value, on top of ongoing peripheral retail pressure, we believe we will see the price of Bitcoin will rise steadily, and at times rapidly, over the next few years.”
Lastly, Bitcoin’s steadily growing market reputation is cemented by the fact that countries like India, Nigeria and Lebanon have witnessed an increasing amount of crypto adoption — especially as stock markets around the world have incurred substantial losses over the past month and a half.
And while in the past, people have tended to flock to the U.S. dollar as a safe haven, the dollar itself is potentially facing uncertain times, causing an increased number of people to take refuge in different offerings to protect their wealth.
Institutions To Capitalize On Crypto Post-Halving?
Another interesting discussion that has piqued the interest of many is whether the upcoming halving will help lure in more institutional players — especially if BTC starts to surge steadily following the event.
In this regard, common sense suggests that if Bitcoin does, in fact, witness a dramatic increase in its value, the asset could join the company of scarce commodities like gold that investors believe can not only serve as good stores of value but also provide investors with a means of hedging economic risks associated with black swan events such as the coronavirus crisis.
Providing insight on the matter, John Cantrell, CEO of Juggernaut — a messenger service built on Bitcoin and Lightning Network that offers end-to-end encryption — told Cointelegraph that as per his research, a whole host of forward-looking institutions have already made moves to understand the value proposition that Bitcoin provides and have therefore invested in the asset.
However, for the big-name players who haven’t really paid attention to BTC, Cantrell believes that the upcoming halving provides them with a perfect avenue for exploration.
Similarly, Prince believes that the crypto market is now ready for an influx of institutional money. On the subject, he highlighted that as things stand, an incredible amount of infrastructure has already been established for retail and institutional investors to own Bitcoin:
“Traditional fintech retail platforms like Square, SoFi and Robinhood have made purchasing Bitcoin available on their platform, and firms like Fidelity and Grayscale are building products to support institutional adoption.”
However, a somewhat contrary opinion is held by Checkmate, co-host of the Rough Consensus podcast and a research contractor for the open-source, autonomous digital currency Decred. He believes that the current volatility and lack of liquid derivative infrastructure to hedge risk has kept big-name institutional players from entering this market, telling Cointelegraph, “Institutions will come when the financial infrastructure and size make Bitcoin an invest-able asset class. The halving likely has little to do with this.”
Market Sentiment Has Already Improved Significantly
Amid the global economic uncertainty, it seems as though cryptocurrencies have been steadily gaining an air of trust and legitimacy around them. In this regard, eToro analyst Mathew De Corrado told Cointelegraph that since the last halving event in 2016, his company has seen an influx of clients looking to add Bitcoin to their portfolio.
He also pointed out that a lot of eToro customers have shown greater interest in cryptocurrency as a result of the increased economic stimulus added by governments across the globe, especially because a vast majority of crypto investors tend to see these assets as a hedge against potential future inflation and the depreciation of their local currency. De Corrado closed out by saying:
“Trust in crypto assets, in my opinion, will largely stem from increased visibility in the public eye, from governmental organizations, increased regulation and/or oversight, and also from increased demand from institutional investors.”
Lastly, Cantrell stated that as more people realize Bitcoin has a fixed supply as well as a known production schedule — meaning the asset can’t be inflated at will — their confidence and sentiment toward crypto will increase at a rapid rate.
Bitcoin’s Reputation Will Remain Unaffected
With the halving fast approaching, it remains to be seen how BTC’s public perception will change after the event, given that the currency may be subject to a price surge or a decline in the short term. If Bitcoin is able to stay on an upward ascent, it would help embed the narrative that Bitcoin is not only a potential long-term investment avenue but also a means of hedging economic risks that are usually witnessed when traditional markets tumble and fall as a result of unfavorable market conditions.
On the other hand, if Bitcoin’s value starts to slide after the halving, investor confidence may be influenced, but when considering the current market situation, this effect may not be long-lasting.
Speaking on this issue, De Corrado believes that irrespective of how BTC’s financial future plays out after the halving, the currency’s reputation will most likely remain unaffected. However, he did concede that if a volatile future is in store, it might present investors with an opportunity to trade on what will likely be increased volatility, in anticipation of the cut to the supply side of the equation. He concluded:
“For context, Bitcoin had one of the biggest weeks of the year, up approximately 19.2% for the week ending Sunday. With such a significant rise in just a single week, the big question will be how much of the halving event caused that rise, and what can investors expect to see in the coming 14-day period?”
Halving Hype Drives Second-Strongest Spot Volume On Record
The run-up to Bitcoin’s halving has driven near-record volumes, with April 30 posting the second-largest daily trade on record.
Pre-halving speculation has driven historic volumes of crypto trade, with April 30 producing the second-strongest single day for volume on record according to a report published by market data aggregator, CryptoCompare.
Notional volume for BTC options on Chicago Mercantile Exchange, or CME, also tagged a new record in recent days, with 202 contracts changing hands on May 5.
April 30 Posts Historic Volume
$66.2 billion worth of crypto assets changed hands on April 30 as Bitcoin (BTC) rallied above $9,000 — comprising the second-largest daily volume behind the $75.9 billion in crypto assets traded during the historic March 13 crash.
CryptoCompare estimates that 73% of trade took place on what they specify as lower-tier exchanges, while $17.9 billion traded on, by their reckoning, top tier platforms.
The three-largest spot exchanges, Binance, OKEx, and Coinbase, represented 10.4% of total trade, hosting $3.6 billion and $2.5 billion in volume respectively. Coinbase ranked third with $818 million.
The dominance of Tether (USDT) on the markets has continued to extend, with USDT pairings representing 74% of all trade between Bitcoin and stablecoins or fiat currencies.
Derivatives Volumes Retrace By One-Quarter
The report finds that Binance was the only exchange to see growth in derivatives volume last month, following the unprecedented volume posted during March.
Binance’s monthly derivatives volume grew 11.6% to post $108 billion, overtaking long-time market leader BitMEX — which hosted $69.3 billion in trade amid a 40% volume drop.
Huobi and OKEx topped the volume rankings during April with $133 billion and $113 billion in trade despite monthly trade shrinking by 10.5% and 31.4% respectively. Institutional platform CME saw an 11.1% drop in trade, posting $4.5 in volume last month.
Compared to March, combined derivatives volume fell 25% totaling $456 billion. The share of total crypto trade also fell from 30% to 27%.
Unprofitable Miners Already Leaving Bitcoin Network Ahead of BTC Halving
The halving is just a few hours away — and many miners are already shutting their soon-to-be unprofitable rigs, says Poolin VP Alejandro De La Torre.
With the halving scheduled to happen in just under four hours, unprofitable miners have already begun shutting down their equipment, vice president at major mining pool Poolin Alejandro De La Torre said in a May 11 interview with Cointelegraph. Per his estimations, these miners account for “15-30%” of the entire Bitcoin (BTC) hash rate.
“Mining farm personnel are shutting [their units] off as we speak since they will not want to do it after the halving — because then they’re losing money,” De La Torre told Cointelegraph.
The miners who are now fleeing will likely never come back online if they don’t upgrade their equipment or find extremely cheap electricity sources, because the mining reward will be halved once the event occurs:
“All older machines will no longer be profitable unless they are mining on nearly free electricity or if the price shoots up by 2x or more.”
According to De La Torre, unprofitable mining operations based in China will be the first to switch off. The halving will take place at early morning local time, which is why Chinese operators are now shutting down profitless units before punching the clock.
Hash Rate To Decrease Post-Halving, Bouncing Back Afterward?
This shutdown will affect the total hash rate, De La Torre added, since the soon-to-be unprofitable units generate “about 15-30%” of that number.
As previously reported by Cointelegraph, Bitcoin’s mining hash rate has seen major volatility ahead of the halving, and is likely to fall soon after it takes place — but could then start to bounce back as the new generation of mining machines gets shipped out.
CME Says Volume Surge Shows Strong Institutional Interest Before Bitcoin Halving
Chicago Mercantile Exchange (CME) says record trading activity for its bitcoin derivatives reflects a strong institutional interest in the imminent halving event.
In a note sent out late on Sunday, the derivatives exchange said a strong “ramp up” in volumes over the past week showed institutional investors were getting exposure to bitcoin, most likely in preparation ahead of the supply-cutting event.
Primarily used by institutional and professional investors, CME said 844 unique accounts have begun trading bitcoin derivatives since the start of 2020 – more than double the number of new market entrants compared to the same period last year.
Average daily volume (ADV) for its bitcoin futures came in at 8,456 contracts year-to-date, more than 43% above the same time period in 2019, the firm added. Total volumes for bitcoin options contracts, which only launched in mid-January, are up to 2,250 contracts, with a record 216 contracts exchanged on May 6.
Open interest – contracts that haven’t settled – in both futures and options came in at just under 9,800 (around $423 million-worth of bitcoin) and 555 contracts (roughly $4.8 million) respectively on May 7. Average daily open interest is up 33 percent from where it was this time last year, CME’s note said.
“With bitcoin halving set to take place on this week, CME Bitcoin futures and options have seen a ramp-up in trading activity ahead of this major event,” the exchange said. “Large open interest holders in Bitcoin futures reached a record of 62 during the week of April 14, reflecting strong institutional interest.”
Ross Middleton, co-founder and CFO of decentralized exchange DeversiFI, said: “Soaring CME bitcoin futures volumes and [open interest are] evidence of the growing Institutional interest in bitcoin both ahead of the halving and as a broader macro hedge.”
It comes as no surprise CME’s volume for bitcoin futures is up because it was “one of the easiest way for legacy firms to gain exposure to Bitcoin,” Middleton added.
Brian Wong, co-founder, and chief product officer at futures exchange BTSE, said funds who would not otherwise have invested in bitcoin may have had a “flagpole” moment when celebrity hedge fund manager Paul Tudor Jones expressed his intention to allocate a part of his portfolio into the asset class.
Of course, CME remains a cash-settled derivatives platform, meaning that while institutional investors are gaining exposure to bitcoin, they aren’t physically holding it. Institutions are excited by the halving but are still only “trading paper,” said Mati Greenspan, founder of crypto analytics site Quantum Economics. As such, they’re limiting their exposure to the asset class.
At the time of writing, bitcoin’s halving event – which will take block rewards down from 12.5 BTC to 6.25 BTC – was expected to take place in just under 10 hours. While the previous two halvings have caused big volatility spikes followed by extended rallies, there is some uncertainty on how bitcoin’s price will be affected this time around.
In a blog post published Friday, CME highlighted this will be the first halving to feature a robust and liquid derivatives market.
Market participants can now create far more sophisticated market positions and miners can now lock-in and hedge their positions ahead of the halving, the firm said. Thus “the selling pressure from miners is less likely to act as a drag on bitcoin prices going forward,” the exchange said.
$200M Worth of BTC Removed From Exchanges Post-Halving
Bitcoin community removes $200M worth of BTC from exchanges the first day after the halving.
Following Bitcoin’s third block halving on May 11, users removed 23,540 Bitcoins (BTC) from online exchanges. This appears to indicate heightened levels of confidence in the asset.
It also continues the recent trend of users moving their coins to wallets they control, and away from major centralized exchanges. In the two months since Black Thursday, the number of BTCs in exchange wallets has dropped from 2,634,574 to 2,332,524.
One might make a logical assumption that users withdrawing funds from exchanges is a bullish sign. If a user intends to sell their Bitcoin in the near future, it would seem counterintuitive to move assets away from an exchange. Instead, it’s possible that users are moving their coins to a non-custodial wallet for more secure, long-term storage.
We can see that on March 12 — Black Thursday, exchanges saw one of the biggest inflows of Bitcoin on record. Users deposited nearly 40,000 coins in a 24 hour period. The trend has reversed as the price has recovered, with users withdrawing their assets from exchanges in droves.
Many key on-chain metrics point to a very healthy Bitcoin network. Hodlers may be betting on Bitcoin to appreciate as a result of the permanent drop in coin production.
As Bitcoin Halving Dust Settles, Network Awakens To Costly New Reality
Now that the Bitcoin block reward has been halved, BTC’s hash rate and transaction fees are feeling the impact.
Things haven’t quite been the same since the Bitcoin (BTC) halving. A substantial number of miners have pulled the plug on their equipment due to the halved reward. Consequently, transaction fees are now considerably higher, the hash rate has shed around 25%–40%, and new blocks are generated at remarkably low speed.
So, what can be done to prepare for this new post-halving reality, or will things return back to normal in the near future? Here is a closer look at which blockchain processes have been affected.
One of the most important post-halving trends is the decreased hash rate, which was something experts had warned about shortly before the event. Because the profitability of miners has plunged due to the halved block reward, the older generation of mining units, such as the widely popular Antminer S9, have been mostly turned off. Currently, an Antminer S9 is estimated to generate a negative of more than $2 per day, so it doesn’t make sense to keep such units online unless miners have access to free electricity.
As a result of the halved reward and a substantial portion of outdated miners being unplugged, the BTC hash rate saw a major 30% drop in the three days after the halving. Although there has been a minor rebound since, the metric is still down around 25%.
Given that the most recent difficulty adjustment — a precoded, self-regulating mechanism that occurs every 2016 blocks and is designed to keep mining speed at approximately 10 minutes per block — allowed Bitcoin to regain just 6% of its hash rate, the trend is likely to continue for the next couple of weeks.
“We might see some more miners leave the network for the time being, despite the beginning of the rain season in China,” Ian Descoteaux, the head of mining at Bitcoin.com, suggested in a conversation with Cointelegraph, referring to the most dominant region of the sector.
Miner capitulation has led to a series of consequences for the sector, which include a significant reduction in block generation speed. The BTC daily block generation metric fluctuated at around 100–120 blocks per day following the halving, but then it plunged to just 95 blocks on May 17, thereby reaching its 2017 lows.
“Miners turning off after the halving caused a hashrate reduction, which causes blocks to be found less often than every 10 minutes,” Philip Salter, the head of mining operations at Genesis Mining, explained to Cointelegraph:
“So the blocktimes rose to something like 12min instead of the usual 10min but the capacity for transactions in each block stayed the same. This causes congestion (less space in the blockchain, same demand for sending tx), and this in turn causes an increase of tx fee. Yesterday [May 19], the average block time was 14min, which reduces transaction capacity of Bitcoin.”
This trend has played a big role in the huge increase in fees, Salter continued, adding: “There must also be increased interest in Bitcoin transactions.”
“I feel it [the high fee level] more likely driven by the increasing interest in Bitcoin,” Chun Wang, the co-founder and managing partner of F2Pool — the largest BTC mining pool — stated in a conversation with Cointelegraph. “Not because the halved block reward or slower block generation.” However, the halving might also be one of the major reasons behind the increasing public interest, Wang added.
The increase in fees is perhaps the most notable halving-related ramification. Transaction charges went up by more than one-third three days after the halving, reaching the $5.16 mark as a result of an 800% monthly increase. The escalation has continued since, as the current fee for a single BTC transaction is about $6.65.
Mark D’Aria, the CEO of crypto consulting firm Bitpro, doesn’t find the sudden increase in fees alarming, telling Cointelegraph:
“Even though fees are high relative to the weeks before the halving, they are nowhere near their peak in 2017 and sit at about the range of the mid-2019 rally or the early days of the 2017 bubble.”
But what exactly is driving the fees up? “Fees have nothing to do with mining,” Alejandro De La Torre, the vice president of top four mining pool Poolin, told Cointelegraph. “There is no correlation between transaction fees and mining difficulty.” He elaborated further:
“Fees increase or decrease primarily because of the fee market created in entering the limited space in a block. If there is a continuous amount of transactions in the Bitcoin network then the fees will remain high. The block space is limited, this creates a fee market. Miners naturally choose the tx’s with the highest fees as this will increase the amount of Bitcoin they make.”
In D’Aria’s view, the fees are unlikely to increase further in the near future. “In the short run, I expect fees to quickly normalize back to previous levels, and then continue the slow increase in average fees over the past few years,” he said, explaining:
“There is nothing intrinsic about the halving that will lead to persistently higher fees going forward. All other things being equal, fees would drop back to pre-halving levels once the average block time has normalized down to 10 minutes. But of course this is a multivariate problem and all other things are never equal.”
D’Aria also noted that an increase in market price tends to correlate with an increase in transaction volume, which would in turn raise the competition for block space. On the other hand, he continued, persistently high fees will force high-volume holders to decrease them using external methods such as transaction batching and Segregated Witness.
The revenue for Bitcoin miners has recently reached early 2019 levels for the second time in 2020 — the first time was around “Black Thursday” in mid-March, the day Bitcoin’s price bled by nearly 50%.
This time, Bitcoin’s price has remained stable. But because the halving mechanism caused Bitcoin miners to generate half the amount of BTC — just 900 coins per day as opposed to 1,800 — miners’ profits have been slashed. Specifically, miners earned 2,188 BTC on May 10, whereas this number fell to 852 BTC on May 12, constituting a 61% decline. However, there is a silver lining of sorts for miners: Network congestion has led to a sharp increase in transaction fees, which now account for as much as 17% of miners’ revenue.
Six Is A Lucky Number?
F2Pool recently made headlines in crypto news media after mining six consecutive blocks, covering block numbers 630804 through 630809. While one might suggest that the network has become too centralized as a result of the halving and decreased hash rate, Wang simply wrote it off as “pure luck” in a comment for Cointelegraph.
“It was likely just a fluke,” D’Aria of Bitpro argued in regard to F2Pool’s streak. “A single pool containing 20% of the hashrate is nowhere near dangerous levels of centralization,” he added, elaborating:
“F2Pool has about 20% of the hashrate, so there is a non-insignificant probability that they would mine 6 blocks in a row. Any other pool could in theory also mine 6 blocks in a row, but it would be somewhat less likely.”
Therefore, consecutive blocks are unlikely to be the new norm for the post-halving mining sector, and the network’s security has seemingly been unaffected.
New Reality Or A Temporary Thing?
So, will the situation return to normal? As mentioned above, the latest adjustment didn’t make a big enough impact, and experts predict that it might take another three to four corrections (around six to eight weeks) before miners can get back to business as usual. A decrease in the hash rate could also help to normalize the situation, Marc Fresa, the founder of mining firmware company Asic.to, told Cointelegraph:
“The only way to go back to what would feel like normal for miners is if we were to lose a substantial amount of hash rate so the difficulty can adjust even further.”
Investing in the next generation of miners is also a viable option, as Fresa added. Earlier this year, mining hardware juggernauts such as MicroBT and Bitmain unveiled their new units, which are capable of producing 100–120 terahashes per second. Most of these devices are being sold for a June delivery, which is why their impact on the network hasn’t been tangible.
“The fact of the matter is that this is ‘the new normal,’” Fresa concluded. These post-halving realities are not necessarily for Bitcoin at large, however. Some experts argue that the overall volatility surrounding the halving event hasn’t been that extreme, which is why it can encourage further adoption.
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