Market Analysts Predict Bitcoin Trends Following Next Halving

The world of cryptocurrency is bracing for a seismic shift as the Bitcoin halving event approaches.

by Faruk Imamovic
Market Analysts Predict Bitcoin Trends Following Next Halving
© Getty Images/Dan Kitwood

This critical juncture, occurring approximately every four years, slashes the rewards for mining Bitcoin by half, potentially unleashing market dynamics that could influence the entire blockchain ecosystem. In anticipation, the community is rife with speculation and strategic maneuvering, particularly among Bitcoin miners who might offload up to $5 billion in Bitcoin post-halving.

The Halving and Its Aftermath

The concept of a "halving" is integral to Bitcoin's design, meant to control inflation by reducing the rate at which new Bitcoins are generated. As we approach the next halving, market analysts, including Markus Thielen, head of research at 10x Research, predict significant market movements.

Thielen suggests that the subsequent sell-off by miners could inject a substantial volume of Bitcoin into the market, possibly sustaining a period of flat growth that might span several months. "The overhang from this selling could last four to six months, explaining why Bitcoin might go sideways for the next few months — as it has done following past halvings," Thielen explained in a recent analyst note.

Historically, Bitcoin prices have remained stagnant or mildly depressed in the months following previous halvings. For instance, post the 2020 halving, prices hovered between $9,000 and $11,500 for five months. This pattern suggests that the upcoming halving could similarly restrain any significant upward price movements until around October, should history repeat itself.

Strategic Moves by Miners

As the halving draws near, miners are reportedly bulking up their reserves. Thielen notes that this is a strategic move to buffer against the reduced block rewards post-halving. This stockpiling contributes to a temporary supply/demand imbalance which, historically, has led to price rallies leading up to the halving event.

However, this year, Bitcoin saw an impressive 74% rise, reaching an all-time high of $73,734 in March before correcting below $63,000 in April. The anticipation of a rally was evidently built into the price much earlier than the halving date.

Miners like Marathon, the world's largest Bitcoin miner, are preparing for the reduction in mining rewards by maintaining a robust inventory. Thielen estimates that Marathon's actions alone could add around 133 days of supply to the market post-halving, based on their current production rate.

"Other miners will likely follow a similar strategy to liquidate part of their inventory gradually," Thielen remarked.

Market Analysts Predict Bitcoin Trends Following Next Halving©

The Broader Market and Altcoins

The ripple effects of the halving are not confined to Bitcoin alone.

Altcoins, which often move in tandem with Bitcoin, could experience heightened volatility. Thielen pointed out that while some predict a correlation between the halving and an altcoin rally, historical evidence suggests that such a rally typically begins almost six months after the halving.

This delay could spell a tough season for altcoin holders, many of whom are still reeling from setbacks since their peaks in 2021.

Current Market Dynamics

The present market situation offers a vivid snapshot of the volatile nature of cryptocurrencies.

Just recently, Bitcoin experienced a sharp 7% drop in a single day, leading to $256 million in liquidations of long positions. This dip, although substantial, is viewed by analysts like Benjamin Cowan as a routine fluctuation within the broader cycle.

"So far, this is a normal drop. In fact, we’ve had several 20-22% drops this cycle," Cowan stated. Despite the ongoing turmoil and speculation surrounding the halving, the fundamental dynamics of supply and demand continue to make Bitcoin a focal point of interest.

Data from CryptoQuant indicates that demand from "permanent holders" now outstrips the new supply being mined, hinting at increased scarcity post-halving, which could, paradoxically, lead to price spikes if demand remains robust.

The Impact of Economic and Geopolitical Factors

The interplay between Bitcoin and wider economic or geopolitical circumstances cannot be underestimated. Recent fluctuations in Bitcoin's price are a testament to the cryptocurrency's sensitivity to global events.

Despite a significant drop and subsequent liquidation of long positions amounting to $256 million, experts like Benjamin Cowan view these movements as typical market corrections rather than outliers. Such volatility underscores Bitcoin's complex relationship with global stability, with MicroStrategy CEO Michael Saylor poignantly declaring, "Chaos is good for Bitcoin."

The Influence of Market Sentiment

Market sentiment, as captured by the Crypto Fear and Greed Index, currently indicates a shift from "extreme greed" to slightly moderated greed, suggesting that investors are reacting cautiously to the current market dynamics.

This sentiment is crucial as it often dictates short-term market movements and can be a precursor to more significant shifts, especially in a market as speculative and sentiment-driven as cryptocurrency. In addition to sentiment, the trading behavior surrounding Bitcoin also highlights the speculative nature of the market.

With about $1.05 billion in short positions at risk if Bitcoin reverts to its previous day's price level, traders seem to be bracing for further downside. This caution is mirrored in the broader market where a staggering $945.9 million was liquidated from traders in a single day, affecting over 253,554 traders globally.

The Future of Cryptocurrency in a Post-Halving World

The upcoming halving will not only reduce the supply of new Bitcoins entering the market but also test the resilience of the mining industry and the broader investment community's commitment to digital currencies.

With Marathon CEO Fred Thiel noting that the firm's break-even rate would be about $46,000 per Bitcoin to remain profitable post-halving, it's clear that economic pressures will shape mining operations and potentially the market at large.

Furthermore, the anticipated scarcity post-halving could lead to a unique market dynamic. As "permanent holders" or long-term investors continue to exceed the market supply of new Bitcoin, we might see an intensification of the scarcity that has partly driven Bitcoin's price increases in the past.

This scenario presents both an opportunity and a challenge, as the market must balance the bullish impulses of scarcity with the potential bearish pressures from miner sell-offs.