A few hours before its fourth advent, the halving of Bitcoin is more than ever at the heart of debates in the cryptocurrency sector. Often linked to bullish discourse, this major event in the system of the queen of cryptos is also likely to generate some harmful consequences. Discover two of these negative effects on the crypto market.
Risk of Bitcoin falling: “Buy the rumor, sell the news”
During its young history, the bitcoin has always experienced significant increases shortly after its halving. On the sidelines of the bull-run following its last halving, the crypto had notably reached a peak of $69,000achieving an ATH at the time.
Source: bitcoinblockhalf.com/tradingview
Although the scenario has changed somewhat on the verge of this fourth halving, with the recent bullish trend having driven the price of the token towards its new ATH of $73,000, it seems that traders have not changed their strategy.
Questions relating to the financial adage “Buy the rumor, sell the news” have already started by animating the canvas. Indeed, many investors are already accumulating the token with the aim of reselling it after a potential explosion following the halving.
Bitcoin halving could be 'buy the rumor, sell the news' event, crypto payments company CEO says https://t.co/vDSh2Gtm4v
— The Block (@TheBlock__) April 17, 2024
This selling pressure could considerably impact the price of Bitcoin over the next expirations, with risks of a downward trend for the entire market.
In a recent blog, Arthur Hayesco-founder and former CEO of the exchange BitMEX, shared this opinion. He specifies that the bullish discourse associated with halving is “well anchored” in the minds of investors.
🔮 Arthur Hayes predicts that prices of #Bitcoin will fall before and after the halving.
“I agree that this will push prices higher in the medium term; however, the price action just before and after could be negative.”
“The halving comes at a time when… pic.twitter.com/qU0jqsPs4X
— Goku 🗞 (@Crypto__Goku) April 9, 2024
According to him, bitcoin could respond negatively to forecasts during this halving with a correction. A possibility that should not be ruled out.
Furthermore, some observers, notably John Nahassenior vice president of business development at Ava Labs, agree that the market has evolved considerably, now tending towards a certain institutionalization with Bitcoin ETF. Which calls into question any analysis based on the increases which followed previous halvings.
If interest in bitcoin declines, investors could turn to bitcoin-themed tokens like 99Bitcoins ($99BTC) which has just raised $500,000 for its pre-sale.
Halving leads to the centralization of BTC mining in the hands of a few players
At its creation in 2009bitcoin was launched as a deflationary token whose total supply is 21,000,000 BTC. To ensure the rarity of its token, Satoshi Nakamoto thought about halving, an event during which crypto mining revenues are cut in half.
With this fourth halving, the number of tokens offered at each validation of a block will increase from 6.25 BTC to 3.125 BTC. Thus, approximately every four years, active miners on the Bitcoin blockchain experience a reduction in their rewards, which in some way slows down their activities.
Consecutively, small companies specializing in mining shut down their machines, no longer able to really make as much profit as before.
Therefore, this event prompts the market to move towards a more centralized system, where the significant share of all mining power is controlled by the large industry pools. A change that negatively affects the entire network, thus becoming vulnerable to manipulation.
Under these conditions, there will in fact be fewer minors who can contribute to the protection and stabilization of the blockchain. Even so, it is worth noting that miners have always been able to overcome these challenges during recent reductions. As an illustration, their income had notably reached a peak during the year 2021.
Source: Nasdaq.com
Today, we are witnessing a widespread awareness of the various entities specializing in Bitcoin miningwhich are actively preparing for this fourth reduction.
However, Adam SullivanCEO of Core Scientific, agrees with some observers and analysts that the price of bitcoin will play an essential role in the future of miners. According to him, a drop in the valuation of crypto could put mining companies in difficulty.
On the other hand, a surge in its price during and after the halving should boost the profitability of miners. This will at the same time promote the maintenance of mining activities.
Sources: Bitcoinblockhalf.com, Nasdaq.com
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