This is the big question of the week, although you may have other questions on your mind, particularly those about Covid-19. But let’s forget the virus for the moment, and focus on the bitcoin halving that is happening this week, in fact in about nine hours from now at the time of writing.
What will this halving, which happens approximately every four years, or every 210,000 blocks, mean for the bitcoin price. Is it a time when investors should jump on board?
What is the evidence for a price change?
We can look back at the halvings in 2012 and 2016 and see what happened. In 2012 the price increased slightly after the halving, but it was nothing like a bull run. In 2016, it shot up and then shot right down to where it had started at the time of the halving. Therefore, it seems reasonable to conclude that we can expect more of the same this time.
As Billy Bambrough wrote towards the end of last week, whilst bitcoin did surge at the beginning of May, that doesn’t mean it is time to invest, because the market is volatile. He quotes Lennard Neo, head of research at Singapore-based institutional-grade bitcoin index fund Stack, who said, “With the bitcoin halving fast approaching, we believe a short-term pullback is highly likely immediately post-halving, as traders begin taking profits.”
Rich Rosenblum, co-head of trading at Hong Kong-based crypto market maker GSR told Bambrough, “
“The move back down to $8,000 wasn’t a big surprise. It’s likely that we’re going to see increased volatility through May, with the pandemic, ongoing stimulus measures and the halving.”
Scott Freeman, co-founder at New York-based bitcoin and crypto-focused institutional trading firm JST Capital, added his view: “Bitcoin has risen over 100% over the last few months and we believe most of that rise was driven by continued retail demand.” He also added a comment of interest: “We expect continued volatility but expect to see good long term risk reward in bitcoin and also expect it to behave in an uncorrelated manner to traditional financial assets.”
Another factor that might galvanise investors is the announcement that Paul Tudor Jones is buying bitcoin as a hedge against the inflation he sees coming as a result of unprecedented coronavirus and lockdown-induced central bank money-printing, Bambrough writes, and we should perhaps take into account that the two previous halvings didn’t take place during a global pandemic.
Scott Freeman believes Jones’ move could prove to be a “seminal moment for bitcoin.” Why? Because the value of traditional assets is looking questionable in this crisis, and he claims he has received calls from a number of institutional investors “who now see bitcoin as a great hedge against the easy money policies and the looming global recession.”
Although it depends on your viewpoint of the crypto market, it appears there is no clear answer about whether or not this is the time to invest, but the views aired by these experts seem to suggest it is.