As the Bitcoin Halving Approaches, Traders Are Wary

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Bitcoin currently stands at $69,764. It tried but failed to surpass the significant mark of $70,000 during the previous week. The road forward is unclear due to deteriorating economic conditions and doubts about how the upcoming halving will affect traders.

One explanation for the stock market’s uneasiness was the unexpectedly poor US inflation figures announced on Wednesday. The Consumer Price Index (CPI) for March came in higher than forecasted, causing uncertainty about a potential Federal Reserve interest rate reduction this summer. Specifically, the CPI for March rose by 0.4%, instead of the projected 0.3%. Additionally, the year-over-year CPI figure reached 3.5%, compared to the predicted 3.4%.

After the Consumer Price Index report came out, Bitcoin (BTC) dropped by over 1%, causing a similar decrease in S&P 500 and Nasdaq 100 futures, approximately 1.5%. The yield on 10-year U.S. Treasuries rose by 13 basis points, reaching 4.50%. Gold, which had been setting new price records, fell to $2,352 an ounce.

The Federal Reserve has indicated that they will not contemplate loosening monetary policy until there is a consistent decrease in inflation. Consequently, traders have revised their outlooks accordingly. According to the CME FedWatch Tool, the likelihood of interest rate reductions is highest in September.

Buy the Rumor, Sell the News?

Arthur Hayes, the co-founder of BitMEX and an analyst, has gone against popular belief by predicting a market downturn around Bitcoin’s upcoming halving. While some traders are optimistic about a bullish surge, Hayes takes a contrasting stance, suggesting that Bitcoin will face selling pressure before and after the event. He explains that the common belief of a price increase following the halving has become widely accepted, which may result in unexpected market outcomes. Furthermore, Hayes mentions that the halving occurs during tax season when liquidity is reduced due to dollar outflows for tax payments. This decrease in dollars could cause risk aversion, potentially triggering a mass sell-off of cryptocurrencies and other risk assets before the bull market recovers.

It’s not just Hayes who is expecting a “Buy the Rumor, Sell the News” event around the Bitcoin Halving. Steno Research analysts predict that the upcoming halving will mirror what happened around the 2016 halving. They see a short-term surge in BTC’s value leading up to the halving. However, within the first 90 days post-halving, the value could dip below its pre-halving price. After the 2016 halving, Bitcoin’s price remained below its pre-halving level for the entire 90-day period. Specifically, on the 90th day post-halving, Bitcoin was priced 8.4% lower than before the halving.

In about a week, we’ll experience the fourth Bitcoin Halving. Every four years, the number of new Bitcoins produced through block rewards is cut in half. This event is called the Bitcoin Halving. Currently, each block reward yields 6.25 Bitcoins, but after the next halving, this will decrease to just 3.125 Bitcoons per reward.

Starting in 2024, the production of new Bitcoins per day will be cut in half from 900 to 450. This decrease, along with the resulting news coverage, is anticipated to create favorable conditions for Bitcoin later on. However, be prepared for market fluctuations in the near term.

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2024-04-11 04:34