With the highly anticipated Bitcoin Bitcoin/USD halving just two days away, analysts at the crypto research firm 10x Research offer a detailed breakdown of what investors can expect in the aftermath of this pivotal event.
What happened: “While social media is abuzz with predictions of an immediate price increase,” he says Markus Thielenanalyst at 10x Research, “our analysis suggests a more nuanced scenario.”
The pre-halving frenzy may not translate into a post-halving boom
Thielen highlights Google Trends data showing an increase in searches for “Bitcoin Halving,” even surpassing the 2020 halving peak.
However, he cautions against relying solely on historical price movements.
“We believe Bitcoin price movements are driven by deeper economic incentives,” says Thielen.
“While previous halvings have been followed by price increases, the average yield has declined over time.”
Short-term volatility, long-term potential
Based on analysis of past halving cycles, 10x Research expects a period of potential consolidation after the initial hype.
Their analysis highlights several key factors:
- Miners Inventory Liquidation: Miners, who face a 50% cut in block rewards, may have to sell a significant portion of their Bitcoin holdings to maintain revenue. This could create downward pressure on the price in the short term.
- Change in supply dynamics: Before the halving, miners could limit supply to inflate prices. However, after the halving, sales are likely to increase to compensate for the reduction in reward.
- Unfavorable macroeconomic problems: Rising interest rates and a potential economic slowdown could further impact market sentiment.
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A look ahead to 2020: Patience may be the key
Thielen points to the 2020 halving as an example.
Although Bitcoin initially saw a modest price increase, the significant rally only began months later.
Likewise, mining stocks initially lagged, but then rallied later in the year.
“This highlights the importance of a long-term perspective,” says Thielen.
“The halving is a fundamental event shaping the future of Bitcoin, but it is only one piece of the puzzle. Other factors will also play a role in determining the price trajectory.”
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