As Bitcoin price surges, what are the main trends ahead of Bitcoin halving?

Editor's note: This article comes from Cointelegraph Chinese (ID: CointelegraphChina), author: SHIRAZ JAGATI, and Odaily Planet Daily is authorized to reprint it.

For more than a month, the global crypto community has been abuzz with discussions about the upcoming Bitcoin halving event. However, from the moment the novel coronavirus spread, the economic depression has affected the entire planet, and compared to previous fluctuations, this halving seems to have little impact on the value of the premier cryptocurrency.

That being said, despite the significant decline in the value of many traditional assets such as oil and stocks since early March, Bitcoin appears to be experiencing a wave of pre-halving bullish momentum, which has helped Bitcoin stay above the $7,500 mark for more than two weeks. Not only that, Bitcoin also climbed to around $8,900 on April 30 (UTC+8), setting a new all-time high, and traders continue to look for a breakout that would allow Bitcoin to gain a foothold above the crucial $8,000 mark.

However, many crypto analysts such as Micheal van de Poppe believe that it will be difficult for Bitcoin to maintain its current upward trend and maintain the breakout level of $8,000 or $8,500. He believes that “events such as halving can trigger an increase in FOMO sentiment (fear of missing out). However, once people realize that the halving will not have a short-term impact, the selling pressure will also be great.”

Impact on hashrate remains uncertain

In addition to the price, the upcoming halving is likely to directly affect many other aspects of Bitcoin, such as Bitcoin's hashrate. Therefore, to better understand this issue, Cointelegraph contacted Tim Rainey, CFO of Greenidge Generation, a New York-based power plant and Bitcoin mining hybrid. In his opinion, if the price of Bitcoin remains unchanged after the halving, its hashrate will see another temporary drop (like it did in March this year). Rainey further added:

“As the last generation of old mining equipment goes offline, new mining farms are coming online, driven by the rainy season in Sichuan. However, we only adopt the latest generation of mining hardware, and we have considered various possible scenarios in our business plan to deal with the situation where the halving results are not in line with expectations.”

In response to this comment, Wayne Chen, CEO of Interlapse Technologies, a financial technology company that aims to promote the adoption of digital currencies, told Cointelegraph that Bitcoin's hash rate may experience intermittent and violent fluctuations in the weeks before and after the halving. However, since Bitcoin has gained more value and reputation since the last halving event and has maintained a successful dominance in the entire crypto market, he believes that Bitcoin's hash rate will continue to rise in the rest of 2020.

Historically, it is clear that Bitcoin’s hashrate has grown significantly after the past two halvings. However, things have changed a lot this time around. For example, investors are now more savvy with Bitcoin, which was definitely not the case in 2012, and even more so in 2016. In this regard, Jose Llisterri, co-founder of cryptocurrency derivatives exchange Interdax, told Cointelegraph:

“Participants are more informed about Bitcoin and it is likely that hashrate will drop immediately after the halving, as we have seen with Bitcoin Cash and Bitcoin SV, which saw their block rewards halved. The reason for the drop in hashrate is that miners are inefficient; their costs are too high to continue operating as the block reward has been cut in half.”

Furthermore, Listri noted that Bitcoin’s hash rate will likely recover after the upcoming crash, as efficient miners will figure out how to reinvest in their operations as the mining difficulty factor begins to readjust itself.

The impact of halving on the Crypto Fear and Greed Index

Bitcoin bulls around the world got reason to celebrate on Monday as the Crypto Fear & Greed Index, a metric used to determine the degree of psychological instability within the cryptocurrency market, moved away from its lowest possible reading in seven weeks, “Extreme Fear.” More specifically, the Fear & Greed Index is based on six core elements: volatility, market momentum and volume, social activity, market surveys, Bitcoin dominance, and Google Trends.

With this in mind, the halving will most likely have a negative impact on the index, as it will likely exacerbate Bitcoin’s overall price volatility in the coming months. However, Listri believes that the halving will have a positive impact on Bitcoin’s market momentum, social media, and overall reputation, as it will help Bitcoin gain a lot of media attention and expose a whole new class of investors:

“This event is likely to generate some optimism among traders. In the months leading up to previous halvings, volumes increased by 50%-150%, but only after the 2012 halving did volumes continue to grow. In 2016, volumes began to decline in July (the halving month) and did not start to rise again until three months later. This time around, we’ve seen a steady increase in volumes, with March seeing the highest monthly volume since July 2019.”

Regarding Bitcoin’s dominance index, it has risen from about 50% at the beginning of 2019 to about 65% currently, while the market share of the second largest cryptocurrency Ethereum has remained stable at around 7-10% during the same period. As things stand, there is no reason to believe that the halving will have an adverse effect on the Bitcoin dominance index.

Providing insight on the matter, Matthew Ficke, head of market development at cryptocurrency trading platform OKCoin, told Cointelegraph that his company’s research data appears to indicate that the upcoming halving is already factored into the overall price of Bitcoin, so there is no real reason to believe that the Crypto Fear and Greed Index will deviate from its current position as a result of the Bitcoin halving. Ficke went on to say:

“Another signal we use to gauge market sentiment is buy and sell activity on our exchanges. Naturally, there has been a fluctuation in trading activity across crypto and traditional markets over the past few weeks, with increased volumes. What is harder to determine is how much of this is related to the Bitcoin halving (and FOMO) versus the market reaction due to the coronavirus.”

Social media sentiment appears optimistic

Ever since social media discussions about the upcoming halving began to attract the attention of the global masses, it seems that most of the sentiment regarding Bitcoin across various major social media channels, especially Twitter, exudes a sense of optimism.

In this regard, Mohanned Halawani, founder of marketing firm Crypto PR, told Cointelegraph that when looking at what people are saying online about the halving, it is clear that Bitcoin traders and holders are sitting on the pump, adding: “Overall, the excitement around the Bitcoin halving has exceeded everyone’s expectations.”

Fick shared a similar sentiment, adding that by comparing Google search volume data with keyword data captured by OkCoin’s social analytics tool, it is clear that people have high expectations for the halving. Kenneth Yeo, CEO of Sparrow, a Singapore-based options trading platform, believes that the general consensus on the halving is very positive: “The mentality of most people right now is that supply decreases and demand increases.”

Related article: Two-week countdown: Experts warn Bitcoin halving may not be a big event

However, in Chen’s experience, social media discussions about halvings are either neutral or slightly bland. However, he pointed out that in reality, Bitcoin halvings are historically very mundane, both before and after the event. Chen further argued:

“Everyone expects prices to subsequently rise. As the COVID-19 pandemic further damages the world economy, we may see a bullish signal sooner than previous halvings.”

Looking ahead

While most crypto experts are currently focusing primarily on the price aspect of Bitcoin, it seems that the upcoming halving may also lead to an increase in criminal activity related to Bitcoin, as it is expected that the value of many major crypto assets may rise after the halving.

Alex Heid, chief research officer at Security Scorecard, an information security company that assesses the cybersecurity risk of corporate entities, told Cointelegraph:

“Ransomware attacks will increase as a result of the Bitcoin halving, likely leveraging known vulnerabilities and phishing as a means of deployment. Financial crimeware that has traditionally targeted banks will target cryptocurrency exchanges at an increasing rate.”