The halving is coming, but this time it may be different

This article is from Decrypt, the original author is Robert Stevens

Odaily Planet Daily Translator | Azuma

According to BTC.com data, based on the current block height and block speed, Bitcoin is expected to experience its third block reward halving at 09:28 UTC on May 12, when the block reward will drop from 12.5 BTC to 6.25 BTC.

For a long time, the cryptocurrency community has had high expectations for the price trend of coins after halving, but crypto research organization CryptoCompare pointed out in a recent report that next month’s halving is completely different from the previous two halvings that occurred in 2012 and 2016.

Although there are many reasons to link halving with rising prices:

For example, the two previous halvings have driven a surge in BTC prices. In theory, the reduction in block rewards will greatly increase the cost of mining, gradually tilting the balance of supply and demand, thereby pushing up the price of the currency.

For another example, investors are obviously much more interested in this halving. According to Google Trends data, as the halving approaches, people's interest in this halving is increasing, exceeding the data in 2016.

The awareness of Bitcoin and all cryptocurrencies has increased significantly, and even central banks are considering using digital currencies to replace or supplement legal tender. The discussion on whether Bitcoin is "digital gold" is also intensifying.

So will the price of the currency definitely rise after halving?

CryptoCompare's judgment is: "After this halving, we may not see a significant surge in the price of BTC."

CryptoCompare gave its explanation. First, the daily trading volume of BTC in 2020 is much higher than that in 2016 and 2012. The categories of market participants are more diverse, large institutions have already entered the market, and this field already has more mature exchanges and more complete derivatives markets.

“This means that the market has become more mature and efficient: the market is more sophisticated in pricing future events and any arbitrage opportunities that may exist in the market will be captured and absorbed quickly,” said Constantine Tsavliris, head of research at CryptoCompare.

The data given in the report shows that in 2016, the total daily trading volume of BTC in exchanges usually did not exceed 1 billion US dollars. But today's trading volume has far exceeded this level. On March 13, the day after Black Thursday, the total daily trading volume of various exchanges reached 21.6 billion US dollars.

Another key change is that the group of miners most affected by the halving has also weakened their influence in this halving compared to 2012 and 2016, compared to some whales. CryptoCompare data shows that miner behavior played a greater role in the BTC price trend after the 2016 halving (compared to some whales), because miners who chose to sell BTC constituted the largest selling pressure in the market at the time.

CryptoCompare further stated that some clues can also be seen in the options market, and the market is currently "more worried about the decline in BTC prices rather than the rise."

“Part of the reason for this may be that BTC plummeted along with the mainstream market in March. The price of BTC was nearly halved during the ‘Black Thursday’, and it has only recently gradually emerged from the shadow. What if something similar happens again? As the halving approaches, the price of BTC has fluctuated so much under external shocks that it may largely offset the expected impact of the halving.”

Tsavliris believes that “the current options market may be more risk-averse, and many miners are also buying protective put options to minimize the risk of holding BTC.”

CryptoCompare finally pointed out that if even miners do not believe that the price of BTC will rise, then we may have good reason to believe that the halving effect may have already been reflected in the price.

This article is translated from https://decrypt.co/27086/bitcoin-halving-crypto-compare-2020. If reproduced, please indicate the source.