Bitcoin’s upcoming halving may be different because of derivatives market
Bitcoin performed fairly well this year in terms of price compared to the previous year. However, the coin did not quite hit the expected mark, considering the hype built around institutional investors. Despite this, the bullish sentiment has not died down as investors and traders seem to be much more optimistic about Bitcoin’s price performance in the coming year, and this time around on the back of Bitcoin block reward halving.
The event is set to occur around May 2020, where the block reward would be further cut in half to 6.25 BTC. Meltem Demirors, CSO of Coinshares, spoke about the effect this event would have on Bitcoin’s price, whether or not it starts drawing an upward trend, in an interview for Unchained Podcast. Demirors stated,
“[…] people always talk about is it priced in, is it not priced in […] the one thing that’s different about this halving is in the prior to halving there was no directionality in the crypto market”
She further elaborated that people could only “fundamentally” long Bitcoin before, whereas now there was a strong presence of the derivatives market, which included CME and Bakkt. Thereby, giving traders more options to trade derivatives. She went on to state,
“there’s also much bigger market for Bitcoin […], there’s bigger firms involved in Bitcoin, so I think now that [the] directionality in a much deeper market for Bitcoin is gonna change the way people trade around the halving”
Demirors also highlighted that, while the price reaction might be different this time around, one fundamental factor would remain the same, the reduction of Bitcoin produced. She even pointed out that the demand for the cryptocurrency was growing, taking into consideration the trading activity on Square’s Cash app, Grayscale’s product, etc.
“[…] people want exposure to Bitcoin in their retirement accounts [..] the fact the supply is getting cut in half and demands going up […] when that happens price goes up and so I do think there will be an impact but I think it’ll be interesting to see how people trade around the halving and particularly some of these large high-frequency trading firms”