Historical Data Shows, Bitcoin Price May Drop After Halving

Historical data shows that bitcoin may experience temporary price declines after halving. But, Traders seem to remain optimistic about the halving of bitcoin expected next week.

05 May, 2020 | AtoZ Markets – The “halving” refers to a programmed-in event in bitcoin’s code, which reduces the reward per block exploited by 50% every four years to control inflation. After the next halving, the rewards awarded will drop from 12.5 to 6.25 BTC. Bitcoin trading volume was lower than in the latter part of last week, but traders appear to remain optimistic ahead of the bitcoin halving.

Bitcoin rose sharply again in the weeks leading up to its impending halving. But based on historic trends, the cryptocurrency could experience a temporary price drop. Bitcoin (BTC) traded down less than 1% over 24 hours, with moving averages of 10 and 50-day technical indicators signalling a bearish sentiment.

Bitcoin has risen more than 125% since its lowest point of $ 3,876 on 13 March. BTC went from 6,600 to 9,300 dollars in the last ten days of April alone. Besides, prices rose more than 15% last week to register the first seven-week streak of bitcoin gains in 12 months.

The significant gains were notably recorded in the weeks preceding to the mining reward halving, scheduled for 12 May. Recall the similar price rallies observed before the two previous halvings, which took place in 2016 and 2012.

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Bitcoin’s Price Performance Ahead Of Halvings

Bitcoin appreciated by 34%, from $ 9.5 to $ 12.75, in the four weeks leading up to 28 November 2012. It was when the mining industry’s rewards were cut by 50% for the first time. Bitcoin suffered its second halving on 9 July 2016. On that day, it traded at nearly 660 dollars, which represents a gain of more than 45% compared to the low of 440 dollars observed at mid -May. But it peaked at $ 780 in mid-June.

Bitcoin has also seen unprecedented gains in the 12 to 15 months since the previous halving. For example, the cryptocurrency hit a record $ 20,000 in December 2017. Some observers expect bitcoin to experience a similar upward trend after the May 2020 supply cut. Gabriel Kurman, a longtime advocate of bitcoin and co-founder of Argentina-based blockchain software provider IOV Labs, said:

“Before the halving, BTC should increase its dollar value by 30%, given its scarcity and its mathematical immutability”.

Mining power increases steadily as we approach toward halving. Halving could lower the selling pressure in the market. Some miners are likely to turn off some machines after halving, said Chris Bendiksen, research manager at digital asset manager CoinShares.

However, investors should note that the previous price increases did not start immediately after the halving. A notable price drop followed the halving of 2016.

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