Bitcoin Halving Won’t Push The Price To The Moon; The Effect Is Just An “Illusion” & “Speculation”: Report


  • The running bullish narrative around the halving event could be an “illusion of validity” and “increasing levels of speculation”
  • Assets experiencing a halving perform no better than the rest of the market
  • Bitcoin and Litecoin display opposite behavior while return distribution before having periods versus outside of it are statistically the same

A new report finds no evidence that cryptocurrencies experiencing a halving event outperform the broader market in the months leading up to and following the reward reduction.

According to this deeper analysis conducted by Strix Leviathan, the return distribution of an asset before and after the halving is statistically the same, stating there is no evidence of abnormal pricing action from a shift in the demand and supply dynamics.

Bitcoin And Litecoin Demonstrate Opposite Behavior

The study involved 24 crypto-assets including BTC, LTC, and XVG. The analysis of 32 halvings across 24 assets found that there is a limited impact of a halving event on the price action, stats the report.

On examining the total returns, Sharpe and Sortino ratios, it says the assets experiencing a halving “perform no better than the rest of the market.”

However, there are two obvious exceptions to the case, Bitcoin and Litecoin, but both exhibit opposite behavior. While LTC over performed in the pre-halving period only to fall to the bottom 25% in the six months following the first halving, BTC lagged market leading up to the halving but was in the “first quartile of performance” following the halving, last time.

This divergence, the report says suggests the shift in supply and demand dynamics are not driving the price.

Increasing Levels of Speculation in effect, Not the Supply Side Pressure

The running narrative in the crypto market that the halving reduces the sell pressure from miners, in turn, creating an imbalance in supply and demand leading to dramatic escalation of price, the researchers Nico Cordeiro and Ava Masucci say though “certainly feasible as a logical theory” could be just an “illusion of validity” and “increasing levels of speculation.”

“We did not find evidence that a halving event results in abnormal pricing action and we are dealing with a circumstantial illusion.”

As for why the surge in Bitcoin price? The authors say it could be due to “widespread belief in the narrative amongst cryptocurrency enthusiasts.”

It concludes that the return on Bitcoin before, during an after a halving coincides with “increasing levels of speculation” that the shift in sell side pressure.

But…

According to analyst planB who uses stock-to-flow ratio to determine the value of Bitcoin finds the leading cryptocurrency going beyond the $1 million value with having playing an integral role.

“Every halving, bitcoin SF doubles and market value increases 10x, this is a constant factor,” wrote the analyst.

In his medium post, planB explains how the digital scarce object Bitcoin’s current SF is 25 that will double after the fourth halving period scheduled in May 2020, coming closer to gold’s 62.

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