Bitcoin's third halving will take place in less than two weeks. Google searches indicate the highest level of interest ever for this event, the third in the life of the world's oldest cryptocurrency.
But some investors say halving will not be the bullish catalyst that many expect. Instead, they say nothing will change. Rather, they focus on other macroeconomic catalysts, including the central bank's unprecedented monetary policies, which could drive the price of bitcoin in the coming months and years.
Will halving bitcoin have a negligible effect on the markets?
Many people are just wasting time discussing the bullish post-halving thesis, said Matthew Kaye, Managing Partner of Blockhead Capital. Some market data suggests that traders "may see an increase in demand in the form of hijacked mineral resources as well as a reduction in the new supply" after halving, he said.
Bitcoin halving events occur every four years when block premiums paid to bitcoin miners are reduced by 50%. The current 12.5 BTC block prize will drop to 6.25 BTC in May.
"The shock of halving the reward is negligible compared to normal exchange volumes," said Francis Pouliot, CEO of the Canadian bitcoin exchange Bull Bitcoin. In the long run, however, a "loss of confidence in other assets" makes it "insanely bullish" on bitcoins, said Pouliot.
The "impact on marketing" of the measures taken by the Federal Reserve is "incomparably greater than the very predictable, therefore boring, of halving," said Pouliot.
The dynamics of bitcoin options
Bitcoin option markets reflect some hesitation in considering halving as a bullish event. The value of the open interest of the put-calls has increased steadily during the month of April, according to Skew data, which suggests that the market is more concentrated on hedging against the downside risk of bitcoins while waiting for halving.
"There is usually an unexpected pullback after halving," said Zoran Scekic, managing partner of Zorax Capital. The call options give the holder the right, although not the obligation, to purchase the underlying asset at a predetermined price by a specific date. Put options give the right to sell.
Recent halving of other cryptocurrencies
Other recent halving events may help set expectations for bitcoin's third halving, according to some investors. Litecoin and bitcoin cash have already experienced similar halving events in August 2019 and April 2020 respectively.
"Bitcoin cash is now trading lower than bitcoin, from 0.035 pre-halving to about 0.032 today," said Max Boonen, founder of B2C2, a major off-exchange liquidity provider.
“Claiming that bitcoin will develop where its bitcoin cousins have not done so is similar to saying that the bitcoin market is less efficient. It seems difficult to me, ”said Boonen.
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