Bitcoin’s next halving event has many speculators expecting a significant price increase, but a contrarian view is emerging that the price may dump instead. The effect of the coin quickly gaining value is that these sharp price increases often lead to price corrections of the same or greater magnitude.
Historically, bitcoin has experienced a parabolic price increase in previous halvings with a buildup of enthusiasm and speculation before the event takes place. Bitcoin’s first halving which occurred on November 28, 2012, saw bitcoin soar to $12.76 on the halving day. Bitcoin’s second halving, however, was different as it bore the effects of the mainstream media covering the story and bringing in new speculators and users into the fray.
In July 2016, the coin made a high of $664. By the time of its second halving, the coin had already lost 5.66% of its value, falling to $626. Moving forward from its initial halving event, the coin traded in a relatively sideways manner for some time until October that year.
The effect of the coin experiencing a sharp bump in price before falling quickly has been dramatically observed in bitcoin’s history. One notable event was the announcement of bitcoin futures being offered by the Chicago Mercantile Exchange (CME) and the Chicago Options Exchange. In the days leading up to the announcement of futures being available to the public, the coin soared to its historic all-time high near $20,000 before losing much of its value in the weeks and months after.
It’s news stories like these that can lead to a “buy the rumor, sell the news” type situation where the coin receives a surge of attention that sends its price to unsustainable levels. These heights are then tested by buyers and more often than not, are found to be built on the shaky ground of FOMO, greed, and newbie investor speculation.
The data from previous events could suggest that bitcoin will receive a surge of interest before correcting to the same, if not lower levels after the enthusiasm of the halving event expires.