Bitcoin Reward Halving to be A “Buy the Rumor, Sell the News” Event?
Bitcoin is moving in tandem with riskier assets, up 45% this month. Climbing as high as $9,485 on Bitstamp today, BTC/USD is currently hovering around $8,800 while managing $4.68 billion in daily volume.
This increase in activity led bitcoin to trend in the top 20 on Chinese Twitter, noted Blockstream CSO Samson Mow.
— Samson Mow (@Excellion) April 30, 2020
Positive macro sentiment + Upcoming halving = Pump
Recently, the Crypto-Confidence Index poll also revealed that two-thirds of Europeans surveyed think crypto is here for the long haul.
Interestingly, Italy, one of the most impacted countries from the virus in the EU was most optimistic about crypto’s future, with 72% believing they will continue to exist in 10 years’ time. Italy was followed by 70% in the Netherlands and Poland with Spain close behind at 68%.
“This latest run past $8,000 is as much about positive macro sentiment as it is about the upcoming halving,”' shared Rich Rosenblum, co-head of trading at GSR.
“We’re starting to have a lot more certainty, as more countries begin to share their plans to reopen the economy in May.
This clearer path forward helps explain why stocks and Bitcoin stabilized over the last seven days, along with today’s burst.”
Investors incredibly bullish on the halving
However, it's not just the unexpected monetary stimulus by major banks and the Federal Reserve saying that they can’t run out of money. Just 11 days away bitcoin halving is another factor fueling this rally.
“The Bitcoin halving in under two weeks may explain some of the bullish activity by speculators,” said Craig Erlam, senior market analyst at Oanda but noted that it is known information as such some of these moves may fade as we hit halving day.
This won't be the first time either.
There have already been two such halvings and ahead of them, bitcoin surged as such the market is expecting the same to happen this around as well. Zac Prince, co-founder, and chief executive officer of BlockFi said,
“May’s halving is a perfectly timed opportunity for Bitcoin. Current market dynamics are driving a bolstered interest in digital currency for the long run that go beyond a rudimentary understanding of the rules of supply and demand.”
“Historically, past halving events have always resulted in an eventual upswing of BTC. We’ve been rightfully bullish in the past, and we’re bullish now,” he added.
But Meltem Demirors, CSO of CoinShares says “sentiment is not yet bullish.” She is also expecting bitcoin to have ‘buy the rumor, sell the news’ on halving.
The Bitcoin Halving isn't an event that investors should "Buy the Hype & Sell the News"
But they'll do it anyway
Which is why a retrace from ~$9,300 isn't out of the question
— Rekt Capital (@rektcapital) April 30, 2020
With the miner inflow cut down around the corner, Bitcoin’s 30-day average sentiment score has hit its highest level since July 2018.
“Investors are incredibly bullish on the halving,” reported The TIE as tweets around the event increased 3x in the past week.
Miners generating fewer bitcoin
However, ahead of halving, that will cut down miners’ bitcoin inflow in half, miners are generating fewer coins than they were a fortnight ago.
This has been due to the rising difficulty and reduced bitcoin generation means the next adjustment will be lower on May 5th.
“Perhaps, if the miners are only able to generate 6,300 after halving (half of 12,600), some are pulling out of the business, as only the most efficient miners will survive. If the price fails to double, the miners’ revenue will halve,” said Charlie Morris of ByteTree.
But this is exactly how the network is designed to work.
If it is uneconomic for miners to produce 6,300 BTC per week after halving at current prices, either price must rise or the difficulty needs to fall.