Newsletter 56: It is Halving Time!

7 mins read

“A well adjusted person is one who makes the same mistake twice without getting nervous.” 

Bitcoin protocol will have future block rewards halved for BTC miners at approximately ~3am (UTC+8, Tuesday) or ~3pm (EST, Monday).

The past week has seen:

  1. Bitcoin transaction fees rise to as high as US$ 3 (usually < 50 cents)! However it is still “cheap” by comparison when compared to any international transfer! 
  2. Volume of crypto futures exchanges surpassing US$ 40 billion in a day.
  3. Bitcoin price fall by US$ 1,700 (-17%) in a matter of hours.
  4. The computing power used to mine Bitcoin, the hashrate, are record high.

 

 

Bitcoin: On a winning streak?

When looking forward, it is always interesting to see what has preceded today and use that to perhaps better understand what the future might bring. Last week led to a weekly red candle close when Bitcoin prices fell from US$9,800 to US$8,100. However it was at the end of a 7 week green streak. 

We found in 2013, when Bitcoin was in its early years of trading on exchanges that it had a long streak 13 weekly candles. Of course, it was interesting to note that the price movement also coincided with Bitcoin’s 1st Halving on 28 November 2012. 

These weekly candle green streaks did not just occur after halvings however. These also occurred during 2015, 2017 and 2019. There were no streaks of 7 or more found in 2014 or 2016. We did find an interesting fact that Bitcoin investors and the crypto bulls would like to know. The table below shows..

..that within the year that a streak occurred, the price of Bitcoin ALWAYS closed HIGHER than the opening price when the streak started.

Remember to do your research, and that trading online is a high-risk investment.

There is an abundance of information out there on Bitcoin halving. We have selected a couple of snippets for you.

 

From Investopedia: The effect of previous halvings in a nutshell

Reward is halved → half the inflation → lower available supply → higher demand → higher price → miners incentive still remains, regardless of smaller rewards, as the value of Bitcoin is increased In the process.

In the event that a halving does not increase demand and price, then miners would have no incentive as the reward for completing transactions would be smaller and the value of Bitcoin would not be high enough. To prevent this, Bitcoin has a process to change the difficulty it takes to get mining rewards. In the event that the reward has been halved and the value of Bitcoin has not increased, the difficulty of mining would be reduced to keep miners incentivized. This means that the quantity of Bitcoin released as a reward is still smaller but the difficulty of processing a transaction is reduced.

This process has proven successful twice. So far, the result of these halvings has been a ballooning in price followed by a large drop. The crashes that have followed these gains, however, have still maintained prices higher than before the halvings. For example, as mentioned above, the 2018 bubble saw Bitcoin rise to around $20,000, only to fall to around $3,200. This is a massive drop but Bitcoin’s price before the halving was around $650. While this system has worked so far, the halving is typically surrounded by immense speculation, hype, and volatility, and it is unpredictable as to how the market will react to these events in the future.

 

From Glassnode: Current investors are still early

Rafael Schultze-Kraft — the founder of analytics platform Glassnode — spoke about Bitcoin’s limited market size in a recent tweet, while referencing data from his platform regarding the size of BTC as compared to gold, the Fed’s balance sheet, and the global currency supply.

“And if you’re wondering just how early we are to Bitcoin — take a look at its relative market size,” he noted.

 

Image courtesy of Glassnode

The above chart shows that BTC still has room to grow as it continues gaining more widespread adoption and attracting new investors.

 

 

Exchange Update: No major issues.

A few points to share on the preparation of the BitOrb Exchange. 

  • The schedule for launch is still for end June 2020. 
  • Exchange deployment is stable.
  • Performance testing results are pending.
  • Bug bounties have been pursued. Good bounties have been paid.

#BeSafe #BitcoinHalving #TradeWell

by

Elina Nasution

18th May 2020

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