Bitcoin’s long-anticipated halving event took place Monday afternoon New York time. Now what?
At the time it took place (19:23 UTC or 3:30 p.m. ET), bitcoin was trading below its 10-day and 50-day moving averages, bearish technical indicators after a huge 10% drop in price on May 10 at 00:00 UTC. This was triggered by an outage striking San Francisco-based exchange Coinbase. At press time, bitcoin (BTC) was trading down less than a percent over 24 hours at $8,677.
The bitcoin halving, which reduced the new supply of bitcoin generated by cryptocurrency miners from 12.5 to 6.25 BTC per block (a reduction from roughly 1,800 BTC down to 900 BTC per day), arrived amid economic unpredictability due to the coronavirus pandemic. “The international scenario is quite different than in 2016, and bitcoin has never been tested during a global economic crisis. So we can expect anything to happen,” said Sebastian Serrano, CEO of Argentina-based cryptocurrency exchange Ripio.
Traders are anticipating unpredictability in bitcoin’s price for the short term, and therefore volatility is expected, says Katie Stockton, managing partner of Fairfield Strategies. “We don’t have a big sample size of past halvings, but they generally have a positive impact on sentiment after a short-term period of volatility.”
“I think the anticipation of the halving has contributed to the outperformance by bitcoin over the past few weeks, and that a breakout greater than $10,055 is likely to unfold after a few weeks of choppiness triggered by today’s gap,” Stockton added.
Mati Greenspan, founder of Quantum Economics, wrote in his daily note that the halving may not mean much immediately, but agrees this event will be a meaningful one over a long time horizon. “It is likely to have an impact in the price over the long term, as the reduced daily issuance makes the asset more scarce,” Greenspan wrote.
“Bitcoin mining pools have actually been accumulating ahead of the halving,” Philip Gradwell, chief economist at analytics firm Chainalysis, said Monday on a CoinDesk Consensus:Distributed panel. “Because of the halving, we could have a bit of a liquidity crunch.”