Introduction
The Bitcoin halving event that occurred on 20th April is generating mixed sentiments among industry leaders. Rising implied volatility suggests growing speculator fear, while miners face significant revenue loss and heightened competition amid escalating electricity costs driven by tech giants’ investments. Adaptability and financial stability are becoming crucial for miners’ sustainability in the evolving landscape.
Bitcoin Halving: Market Reflections from Marathon and Crypto.com CEOs
The CEO of Marathon, Fred Thiel, claims that the Bitcoin halving event that happened on 20th April 2024, may be already in some way reflected in the past Bitcoin price. He also reminds us of the fact that Bitcoin price went up even before the approval of ETFs, and thus, it is possible that ETF adoption could have led to the faster-than-usual growth of the price. Thiel posits that although halving can decrease the daily supply of Bitcoin which might in turn affect the prices of Bitcoin, the current market conditions such as the influx of ETFs could act as a buffer.
Thiel estimates that Marathon’s breakeven rate should decrease to $46k per Bitcoin after the halving to produce a profitable return. Even though Bitcoin price has recently decreased, Marathon’s stock still gives out stable signals which is a sign of the wide investors’ community trust in the company.
Thiel points out that prices have been rising before the halving contrary to the trend observed during earlier cycles. This deviation implies that market participants were pre-positioning their assets to have an edge over the rest during the event to capitalize on any opportunities to sell at a higher price.
Thiel’s observations highlight the complex interplay between market sentiment, technological developments, and supply dynamics shaping the cryptocurrency landscape.
The chief executive officer of Crypto.com, Kris Marszalek, believes that the selling may occur before the price reaches the new peak as Bitcoin traders follow the “buy-the-rumor, sell-the-news” strategy. On the other hand, however, Marszalek pinpoints that in the long term the effect of halving will be positive on the price of Bitcoin by reducing the supply. Despite doubts about whether Bitcoin’s price will see a significant surge following the halving, Marszalek remains optimistic about the market’s prospects,
Implied volatility, a leading measure of the options markets, was on its rise before the halving day; this has traditionally been a plus sign for Bitcoin’s value. As mentioned by Kaiko Research, the recent increase in implied volatility announces the growing fear of the speculators.
The rise in the interest rate often brings a lowering of market participants’ confidence in future price movements and so they rush to buy options which enable them to guard against the unexpected price movements either way.
The week before the halving, there was a market reversal, as the implied volatility of Bitcoin was on the rise with its price fluctuating by more than 8%, in the wake of heightened geopolitical tensions. The change in the implied volatility for contracts maturing within the next two weeks has been particularly steep, from 59% to 71%, reflecting the marked foresight of near-term volatility.
Bartosz Lipinski, founder and CEO of Cube Exchange, suggests that this unique event could exert significant pressure on Bitcoin’s price dynamics, especially considering the scarcity of the asset.
While historical data on previous halving events suggests a mixed short-term impact but generally bullish long-term trends for Bitcoin prices, Kaiko cautions that the sample size of three halvings may not be sufficient for conclusive analysis. Additionally, other bullish factors within the cryptocurrency industry have likely contributed to the price gains observed post-halving.
Bitcoin Halving: Impending Revenue Loss and Challenges for Miners
The recent completion of the Bitcoin “halving” update, which occurs approximately every four years, has significantly reduced the mining reward, affecting companies that ensure the smooth operation and security of the digital currency. This event, designed by Bitcoin’s creator Satoshi Nakamoto, aims to maintain a hard cap of 21 million Bitcoins to prevent inflation. Following the halving, the daily reward for miners has decreased from 900 to 450 Bitcoin.
Bitcoin advocates view the halving as a positive catalyst for the current bull market, as it reduces the supply of new tokens amid increasing demand, especially from new exchange-traded funds. However, analysts suggest that the market had already priced in the event, limiting significant price movements. Despite this, transaction fees on the Bitcoin network experienced a notable spike post-halving.
While the halving reduces the dilutive effect of Bitcoin mining over time, macroeconomic factors like Federal Reserve signals and geopolitical tensions may influence short-term bullishness. The primary impact of the halving is expected to be felt by Bitcoin mining companies rather than the cryptocurrency’s price directly.
Looking ahead, the next halving is scheduled for 2028, further reducing mining rewards. Eventually, when the cap of 21 million Bitcoin is reached, miners will rely solely on transaction fees for revenue.
Following the Bitcoin halving, transaction fees surged to $128 per transaction but swiftly plummeted back to under $10. This drop occurred just a day after fees hit a record high on April 20. Initially, these high fees helped offset the halving’s impact on miner revenues. However, with current average fees per block falling below the reduced reward of 3.125 BTC, miners are now feeling the pinch.
Conclusion
In conclusion, the Bitcoin halving event prompts varied outlooks, with potential market shifts and challenges for miners amid rising volatility and competition. Adaptability and financial stability emerge as key factors for navigating the evolving landscape.
These informations are based on the articles analyzed and reported by ThePlatform’s analysts team: https://www.bloomberg.com/europe
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