The world economy is slumping and the Federal Reserve continues to print money; both of which are good news for Bitcoin. Better still, is that the Bitcoin Halving is expected to occur on either the 11th or 12th of May. Will this be enough to beat its historical trend of slumping after a spike?
Last Thursday, Bitcoin’s price spiked up to $9400, which if history tells us anything, may precede a lengthy drop in price. Whenever Bitcoin has risen more than $1000 dollars in a day (Thursday’s move was $1700!), extended losses often follow.
Do factors like the upcoming Bitcoin halving and continued government coronavirus-related stimulus packages hold the key for Bitcoin to beat its past demons?
What is the Bitcoin Halving?
Well, the Halving occurs every four years and is an event where the reward for Bitcoin mining reduces by half. Rather than receiving 12.5 BTC for verifying each block, in two weeks time a Bitcoin miner will only receive 6.25.
This means that mining will become a lot less profitable after the halving, which in turn drives an increased period of activity before the event as miners look to stockpile as many coins as possible.
Bitcoin’s price skyrocketed after the 2016 halving. Four years later, the interest in Bitcoin is even greater. On April 29th, Binance exceeded twelve billion dollars in its daily trading volume. This smashed their previous record from January 2018, which I’m sure you can all remember was when Bitcoin reached its highest price.
Continued government stimulus good news for Bitcoin
The US Government is determined to keep providing financial aid to its citizens in need and the Federal Reserve is printing money to facilitate this. Unfortunately, this is decreasing the value of the Dollar, which will give investors pause for thought as to whether they should look to safer harbours such as Bitcoin. More importantly, the recipients of these government hand-outs could well be looking to put their new pool of cash into cryptocurrencies as well, as Bitcoin has had an eye watering ROI so far this year.
Will it be enough?
The simple answer is: we don’t know. But there are some truly promising signs for a good run before the halving takes place. It would be great to see Bitcoin break free from the shackles of its past, in terms of its performance following $1000+ spikes in 24 hrs. The current global climate as well as the upcoming Halving looks set to make conditions for a perfect storm. Although nobody can know for certain how the price will be affected, it’s going to be an interesting few weeks for sure.