Bitcoin faces a ‘curveball’ as halving may commence under ‘unseen’ global market conditions
Bitcoin‘s halving is due in 7 weeks and historically it has triggered a massive bull run. The collective digital asset industry has been on the edge lately as the community has been dealing with major price fluctuations. Last week, the crypto market cap lost over $43 billion and since then, many tokens have registered new all-time-lows over the past 12 months.
The previous two halvings took place under different market conditions and Bitcoin is currently bracing itself for the reward reduction under a drastically different scenario.
Normal Financial Crisis or Fear of Recession?
A recent study by Gate.io explained the influences of Bitcoin Halving. The report indicated that on both previous occasions after the halving, BTC price and its hashrate managed to surge after initially witnessing a minor drop.
The first halving took place on 22nd November 2012 and the second halving took place on July 9th, 2016. According to the chart below, the S&P 500 market was doing well 6 months prior to the event on both occasions.
In 2012, it was up by 11 percent before halving and in 2016, it was up by 14.74 percent. At the moment, if the S&P 500 stock stabilizes, the asset would be carrying a 21.57 percent loss over 6 months, before the Bitcoin halving on 2oth May 2020.
Although Bitcoin is assumed to be an uncorrelated asset, it has been highly correlated with traditional stocks in 2020, as reported earlier.
BTC miners’ current and future dilemma
Due to the global market meltdown and the recent collapse of the crypto market, Bitcoin miners are not only facing marginal pressure from the slash in BTC supply but the pressure of liquidity strain.
Although Bitcoin‘s price has relatively improved over the past few days, but remains extremely volatile to another price swing.
During a halving event, the strong and most profitable miners are able to hang around due to extensive resources. The weak miners usually remain over-leveraged and they are unable to maintain strength against big players.
The hashrate recently dropped, which indicated that some miners might already be backing out but this problem may remain after the halving as well.
Bitcoin’s price before halving crucial
In order for miners to remain profitable, it is highly critical for Bitcoin to attain levels above $8000 before the event. According to data, the cost of mining a bitcoin ranged between $5000-$7500 in 2019, and under current liquidity strain, the cost is expected to escalate.
At press time, Bitcoin was valued at $6600, and it is currently facing a race against time to scale back to early highs. Considering the entire financial market’s turbulent state, Bitcoin’s imminent halving will take place in a market scenario uncharted and unforeseen.