Crypto-verse inhabitants are looking forward to Bitcoin’s halving – where the profit obtained from mining new blocks in the network will be cut by 50%, hence, reducing the mining reward from 12.5 to 6.25 bitcoin – and the benefits it will bring about on the Bitcoin price.
Famous CT account “Plan B” explains how Bitcoin has needed a monthly inflow of about $400M to possibly maintain the $7,000 price level for two and a half years, so after halving it will only need $200M per month to maintain its price or even break the ATH if it stays in the $400M range.
To maintain $7000 since Oct 2017, #bitcoin must have had about $400M new cash inflow every month last 2.5 years! (30d x 24h x 6blocks x 12.5btc x $7k assuming all trading is zero sum game)
— PlanB (@100trillionUSD) April 6, 2020
After the halving, we only need $200M per month to keep $7k level. If $400M stays, thenpic.twitter.com/d6hYJqxIUr
Hashcash inventor and Blockstream CEO Adam Back replied to the tweet and emphasized that even though there could be optimism in the air, users are mostly expectant to see what will happen.
This seems to be a natural way of thinking. If there is one clear thing in the world of cryptocurrency, it’s the volatility of the market, and despite what charts say (basically that every halving has been bullish for bitcoin) the future is uncertain because crypto works 24/7 and the market is extremely susceptible to external events.
On the other hand, Plan B agrees with Adam Black and even points out that while other people have doubts about the capitulation of miners and the recent crash of the financial markets, for him these are problems that will simply disappear once the halving is complete.
Miners’ Capitulation the real deal?
Analysts often argue that miners’ capitulation highly influences Bitcoin prices. This is illustrated by the Hash Ribbons, an indicator that uses a short- and long-term moving average of the BTC hash power to show miners’ behavior in relation to Bitcoin’s performance.
According to this indicator, investors should be concerned about the capitulation of the miners. Hash Ribbons show that miners enter a cycle where they have to sell their currencies when mining becomes unprofitable, drastically boosting a bearish sentiment, pushing the price down and minimizing the buying interest.
While some investors believe the history of market capitalization since the first halving is a good enough precedent to predict the future, others rely on statistical laws before betting on a very volatile market.
In the end, no matter which side you are on… never invest more than what you can afford to lose. And that is an economic law you should never forget
