Bitcoin halves for third time
The third bitcoin halving happened against the backdrop of the pandemic, possibly challenging the global dominance of the US dollar, with the digital yuan and Libra laying the foundation.
Bitcoin is viewed by some as digital gold with decentralised, blockchain technology-encrypted characteristics. Others see it as one of the biggest scams in history.
Created in 2008 by a person or group writing under the pseudonym Satoshi Nakamoto as a peer-to-peer decentralised electronic cash system, in 2009 50 bitcoins per block were given as a reward to miners.
After 210,000 blocks are mined, about every four years, the block reward halves and will keep on halving until the reward per block becomes zero, which will be near 2140, according to bitcoinblockhalf.com
The latest halving took place early Tuesday morning local time. In the latest halving, the total number of bitcoins mined per block is reduced from 12.5 to 6.25.
Halving is when cryptocurrency mining companies and individuals find out the reduced payment that they will receive in return for their contribution to the system’s smooth operation.
By design, the number of bitcoins in existence is capped at 21 million.
The first halving began at a value of US$2.01 per bitcoin in 2012, with the reward reduced to 25 bitcoins per block. The second halving began in 2016 when bitcoin was valued at $664.44, with the block reward halved to 12.5 bitcoins.
Bitcoin trading reached a fever pitch in 2017 as surging demand pushed the price to an all-time high of $19,511.
The price of bitcoin has continued to fluctuate during the first five months of 2020. But as halving approached the price rose from around $6,000 in early April to nearly $9,000, almost touching $10,000 at one point, a sharp contrast to the price movement of other physical financial assets during the global virus pandemic.
The price of bitcoin is valued at $8,810 as of press time.
Although there is much hype surrounding the price outlook of bitcoin, the price effect from bitcoin halving might not occur instantly, said Piriya Sambandaraksa, managing director of ChalokeDotCom.
Halving itself does not affect the price of bitcoin, but rather the cryptocurrency’s fundamentals as circulation is reduced, said Mr Piriya. This in turn affects investors’ reaction toward the demand of bitcoin.
“Many investors speculated on bitcoin before the halving occurred. Among them were newcomers and those who did not know much about the cryptocurrency. Some bought on expectations the price could overshoot, while others purchased based on rumours and would sell after the halving,” he said.
“The most important factor is demand. Demand for bitcoin does not increase from halving, but rather other factors.”
Based on previous statistics, every time the stock-to-flow ratio changes, demand increases, said Mr Piriya, noting there could be a new narrative with bitcoin demand as an asset to hedge investment risks, for instance.
Although the supply of bitcoin has decreased this year, organic demand similar to the phenomenon in 2017 is still missing, said Sanjay Popli, chief executive at Cryptomind.
“Halving has created a lot of FOMO [fear of missing out] for some newcomers, but we didn’t see any real volume at all. The market is still in the consolidation phase as many institutional investors are still not confident about this asset class at the moment,” said Mr Sanjay.
Optimism about bitcoin has centred on its scarcity and stored value, but it will take a while for this cryptocurrency to cement its reputation in the digital realm.
“Whether bitcoin will be a substitute for physical gold is difficult to say as many people still have yet to accept it. It is not widely used like Promptpay transactions and there has to be a well-established system for people to use bitcoin widely,” said Prinya Hom-anek, president and chief executive at ACIS Professional Center.
As bitcoin mania has subsided from the frenzy three years ago, the digital currency currently in the spotlight is the digital yuan.
Akin to Facebook’s proposed Libra digital currency and other cryptocurrencies such as bitcoin, the officially named Digital Currency Electronic Payment will be powered partially by blockchain technology and dispersed through digital wallets, Reuters reported.
What sets it somewhat apart, however, is the digital currency’s design seemingly provides Beijing with unprecedented oversight over money flows, giving Chinese authorities a degree of control over their economy that most central banks do not have.
“This should be a closely watched development for whether [the digital yuan] is widely used and accepted in daily use, both inside and outside of China,” said Mr Prinya.
The digital yuan could also have implications in shifting the global financial paradigm long dominated by the greenback in the long run.
“I think the first aim would be to increase the yuan circulation on the global level,” said Mr Sanjay. “I would say it won’t rock the dollar yet, but we are seeing a different type of war waged. With [the digital yuan], the Chinese can offer this option to countries that are sanctioned by the US.”
Author: Bangkok Post Public Company Limited
Bitcoin US Dollar Hotbit (BTC USD) Kurs – Investing.com
No results were found for this search term
What is your assessment of BTC / USD?
Bitcoin goes through third ‘halving’, falls vs US dollar
NEW YORK: Bitcoin slid on Monday (May 11) in volatile trading, after it went through a technical adjustment that reduced the rate at which new coins are created, but the outlook remained upbeat as the increase in supply slows down.
Monday’s “halving” cuts the rewards given to those who “mine” bitcoin to 6.25 new coins from 12.5. The next halving will be in 2024.
Bitcoin relies on so-called “mining” computers that validate blocks of transactions by competing to solve mathematical puzzles every 10 minutes. In return, the first to solve the puzzle and clear the transaction is rewarded new bitcoins.
In late afternoon trading, bitcoin was last down 1.3 per cent at US$8,620.43 against the dollar on the Bitstamp platform. It briefly turned higher.
“The incentive is less for miners now to mine bitcoin and they will probably switch to more profitable cryptocurrencies. So in the short term, there’s going to be pressure for bitcoin,” said Edward Moya, senior market analyst at OANDA in New York.
“But longer term, you’re probably going to see higher prices. With all the fiscal and monetary stimulus that’s being pumped into the global economy, there’s renewed interest from institutional traders looking for alternatives to modern government-backed currencies.”
Bitcoin has gained more than 20 per cent since the beginning of the year. It touched US$10,000 last week, a roughly three-month high, after Bloomberg reported that hedge fund manager Paul Tudor Jones has backed bitcoin as a hedge against inflation.
Traders said the prospect of bitcoin’s halving has fuelled gains in the asset this year.
Bitcoin two earlier “halvings”- one in November 2012 and the other in July 2016 – had signalled the start of bitcoin’s most dramatic bull runs over a period of several years, although not before a brief sell-off.
The previous two bitcoin events propelled rallies of about 10,000 per cent from late 2012 to 2014, and roughly 2,500 per cent from mid-2016 to the currency’s all-time high just shy of US$20,000 in December 2017, according to traders.
Scott Freeman, co-founder and partner at crypto firm JST Capital, said volatility should subside from its recent highs now that the “halving” has happened.
“Given that the halving happened without any interruption to crypto markets, we expect to see continued growth in the crypto eco-systems, especially with recent increased interest from institutional investors and the continued buying by retail investors,” he added.
The ‘halving’ is nigh and bitcoin is losing ground
Bitcoin appears to be running out of steam just before one of the most anticipated milestones among cryptocurrency enthusiasts.
The largest digital token tumbled over the weekend, declining about 13% to around $8,675. It rebounded to about $8,840 as of 10 a.m. in New York trading on Monday. The decline took place ahead of a closely watched technical event known as its halving, when the rewards miners receive for processing transactions will be cut in half as soon as later today.
“It’s likely that we’re going to see increased volatility through May, with the pandemic, ongoing stimulus measures and the halving,” Rich Rosenblum, co-head of trading at crypto market maker GSR, said in an email. “The record open interest for futures and options at multiple exchanges adds to this. The market is in a state of information and position overload, exacerbating the potential for volatile moves.”
Still, Bitcoin’s up near 25% this year and among its newest fans is famed macro investor Paul Tudor Jones, who said he’s been buying Bitcoin as a hedge against the inflation he sees coming from central bank money-printing.
“It’s not the great cure for all the monetary ills, et cetera. It’s a great speculation,” Jones, the founder and chief executive officer of Tudor Investment Corp., said in an interview with CNBC on Monday. He’s got over 1% of his assets in Bitcoin, though it might end up being a top performer within his portfolio, he said.
Bitcoin, which is a little more than a decade old, has not stood the test of time, said Jones, but the digitization of the world “clearly benefits” the token. He sees an expanding user base for the cryptocurrency, a hallmark of every bull market, and anyone buying Bitcoin is betting that universe will continue to broaden.
“We’re watching the birthing of the store of value- and whether that succeeds or not, only time will tell,” said Jones in the interview. “What I do know is, every day that goes by and Bitcoin survives, the trust in it will go up.”
In the near-term, many Bitcoin are looking forward to its halving, which happens about every four years and slows down the rate at which new tokens are created- an intentional feature designed to control inflation. Bitcoin has historically bottomed 459 days prior to the halving, risen into the event and jumped after, according to research from Pantera Capital. Post-halving rallies averaged 446 days.
“So far, Bitcoin’s third halving looks different to prior events and there doesn’t appear to have been such a sustained price run-up,” said Payal Lakhani, director of equity research and product development at CME Group, in a blog post Friday. “Given the reward change has been known since Bitcoin’s inception in 2009, and having already seen two such events, investors may have already incorporated the supply adjustment into their models and taken positions accordingly.”
The impact of Covid-19 has resulted in lower volumes as some participants focused on non-crypto markets, and some mining operations being affected by these difficult market conditions, Lakhani said.
-With assistance from Eric Lam.
Author: Joanna Ossinger and Vildana Hajric
Top Crypto Traders Predict Bitcoin Price Direction After BTC Halving
Bitcoin’s (BTC) price has been showing extreme levels of volatility as it consolidates under a key level of $10,000. The price dropped to as low as $8,100 on May 11, merely a day before the highly anticipated mining reward’s halving.
Following the 20% drop, traders remain divided on where the Bitcoin price would go next, with some traders believing that BTC could immediately see an upsurge to the $14,000 to $15,000 resistance area.
Historically, when Bitcoin’s price saw an extended rally, it went past key resistance levels with ease. For instance, it took BTC 28 days to increase from $8,000 to $20,000 in December 2017. In June 2018, Bitcoin’s price rose from $7,500 to $14,000 in just three weeks. So, BTC’s price has the tendency to increase by a large margin in a short period of time, especially when met with huge demand from retail investors.
However, other traders foresee Bitcoin’s price testing lower support levels after its fall to $8,100. Given that Bitcoin fell post-halving in the last two halvings, technical analysts expect BTC to retest the mid-$6,000 region at the lowest.
The primary bullish scenario following Bitcoin’s block reward halving is a breakout of a major trendline above the $14,000 mark, which dates back to 2017. In the past year, Bitcoin’s price moved within a large multi-year cycle established by its record high at $20,000 and its June 2019 peak at $14,000. Every time Bitcoin’s price got close to breaking out of the range, it was met with a fierce rejection.
Bitcoin’s price in a multi-year cycle dating back to December 2017. Source: Satoshi Flipper
If the current Bitcoin momentum is overwhelmingly strong and breaks out of the multi-year trend, there is a possibility that it will trigger a major uptrend. Cryptocurrency trader Satoshi Flipper said:
“I’m still betting on breaking through the upper trend line resistance and price action heading north. No way are my convictions changing because some clowns sold their BTC and price tanked 1 day.”
A Bitcoin technical analyst known as “Galaxy” echoed a similar prediction, saying that the last time BTC saw seven consecutive weekly candles, a 160% increase followed. In the last seven weeks, Bitcoin’s price continued to increase without major pullbacks, which last happened in December 2018. Following the seven weeks, the price surged from $3,100 to $14,000 in only seven months by June 2019. Galaxy said:
“Look what happened the last time we had 7 consecutive green weekly candles. We had a ‘doji’ candle, followed by a 160% increase. By the looks of it, we’re in for a ride.”
Bitcoin weekly fractal between early 2019 and 2020. Source: Galaxy
Bitcoin’s optimistic medium- to long-term trend based on fractals and technical indicators is further fueled by the entrance of high profile investors into the cryptocurrency market. In an interview with CNBC, billionaire hedge fund manager Paul Tudor Jones said that the trust in Bitcoin will increase as time passes. He emphasized that the asset is merely 11 years old and that it is in an early phase of growth. Jones said:
“When it comes to trustworthiness, Bitcoin is 11 years old. There is very little trust in it. We are watching the birth of a store of value. Whether that succeeds or not, only time will tell. What I do know is that every day that goes by and Bitcoin survives, the trust in it will go up.”
Given the influence of Jones in the financial market, there is a possibility that other institutional investors may follow his lead to invest in Bitcoin. Grayscale already recorded more than $380 million in institutional investments in the first quarter of 2020, which supplements the bullish scenario of Bitcoin after the halving.
In the short-term, several cryptocurrency traders anticipate Bitcoin’s price to drop to as low as $6,500. There are strong arguments to be made for a temporary bearish price trend after the halving. A confluence of Bitcoin nearing a major overhead resistance at $10,500 and historical data suggest a steep fall following a halving.
According to Bitcoin trader “Dave the Wave,” if the price of BTC continues to move based on a fractal taken from 2019, it is likely to see a pullback to the $6,000 region:
“If the fractals continue to hold, time to start thinking about consolidation levels. 50% consolidation in real terms would put BTC in the 6K range. All good for going forward.”
$6,400 is a key pivotal point for BTC’s price. Source: Dave the Wave
The mid-$6,000 area in between $6,400 and $6,600 also carries significant historical importance. In the third quarter of 2019, Bitcoin’s price dropped from $10,500 to $6,410. It consolidated in the $6,000 range for four weeks before breaking out to $10,500 once again in February 2020.
A drop to $6,400 would solidify the mid-$6,000 support area, strengthening the Bitcoin rally for a more robust extended uptrend in the second half of 2020. A cryptocurrency trader known as “Wolf” raised a similar concern. Bitcoin’s price has moved within an ascending triangle pattern since its abrupt recovery from $3,600 on March 12.
The sudden price drop to $8,100 on May 10 led the formation to break, technically leaving Bitcoin vulnerable to a severe correction. At the time, cryptocurrency investor Scott Melker said that the market observed a strong shakeout. Melker added:
“That was the highest hourly volume candle since the epic crypto doom fest on March 12th. I won’t be rushing into a position until this shakes out a bit. That was some real deal selling we just witnessed.”
Bitcoin at risk of breaking down from an ascending triangle. Source: Wolf
A pullback from the $10,000 level would provide some stability into the market after a 160% rally within a two-month span. Bitcoin’s price rose by nearly threefold with barely any corrections that left technical analysts worried about the sustainability of the upsurge.
In the short-term, Bitcoin’s price faces two major variables: a sudden inflow of capital from institutional investors and capitulation from small miners. Considering that institutional investors allocated hundreds of millions of dollars into Bitcoin during the first three months of the year, the probability of a larger amount of capital entering the market after the halving is high.
Barry Silbert, the CEO of Grayscale, said in a tweet that his investment firm reached $3.7 billion in assets under management on May 9, an all-time high for the company. Grayscale said in its Q1 report:
“Hedge Fund Investment Gains Steam: 88% of inflows this quarter came from institutional investors, the overwhelming majority of which were hedge funds. The mandate and strategic focus of these funds is broadly mixed and includes Multi-Strat, Global Macro, Arbitrage, Long/Short Equity, Event Driven, and Crypto-focused funds.”
In contrast, a variable that may cause a Bitcoin downtrend in the near-term is the possibility of capitulation by small and overleveraged miners. After the halving, the breakeven cost of mining will hover between $12,500 and $15,000, depending on the difficulty of the mining as the TradeBlock report explained at the start of 2020.
While the cost of mining Bitcoin is likely to be lower than most estimates, even at the lowest forecast of $12,525, miners will be operating at a loss for at least several months. The relatively low price of Bitcoin opens BTC up for a miner capitulation, forcing small miners to sell BTC. Digital asset manager Charles Edwards tweeted:
“This will be the most brutal Bitcoin Halving in history. Production cost is about to double to $14,000. 70% above the current price. Last halving, price was just 10% below Production cost, and Price & HR collapsed -20%. Without FOMO now, expect a big miner capitulation. 30%+”
Both variables are not likely to affect Bitcoin’s price in a meaningful way in the immediate-term, as they represent extreme scenarios. BTC is now at a critical juncture that may decide its price trend over the next 12 months, and generally, traders remain long-term optimistic about the price trend of BTC.
Author: Joseph Young