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Bitcoin Trying to Take $10,000 Resistance Following Halving Event

May 14, 2020 at 16:04 by Matt Jackson

Bitcoin price pushed back above $9,500 today, recovering most of its losses following the weekend flash crash. Investors are hoping the cryptocurrency will continue with a push towards $10,000 resistance. Total cryptocurrency market capitalization is also up, following the Federal Reserve’s warning of poor economic growth and as figures suggest that more investors are storing their cryptocurrency away from exchanges.

Bitcoin experienced a pre-halving flash crash last weekend, falling from a recent high of $10,500 on May 8 to a low of $8,500 on May 10. Some parties labeled the fall as a pre-halving dip and had expectations that the price would rise again following the event, which happens every four years. As digital gold’s price has recovered around 75% of this dip, the predictions have gained a lot of ground. Those that bought the dip have seen gains of more than 10% since the event.

The halving event takes place every four years and is hardcoded into Bitcoin’s blockchain. It is often referred to as quantitative hardening by Bitcoin proponents, and it means that the rewards for mining coins are halved. This helps to curb the increase in supply of Bitcoin, of which there will only ever be 21 million produced. It doesn’t halt the supply of the coin, but it does limit the rate at which the finite supply increases, which is expected to push price upwards according to the supply/demand model. However, many traders believe that this has already been factored into prices and so, despite the fact that the two previous halving events have led to significant increases in the proceeding 12 months, there is debate over whether the same boom will occur this time around.

The halving certainly has an impact on miners, who are responsible for verifying transactions via a series of algorithms performed by their mining computers. Some mining companies were already struggling to mine profitably since the emergence of the Coronavirus pandemic and the subsequent price crash in March. Early figures suggest that the hash rate, which is the speed at which a transaction is verified, has dropped since the halving. Whereas the hash rate was approximately 8 minutes leading up to the event, it was clocked at 11 minutes following the event. This signifies that fewer miners are operating at the current price.

While miners do suffer, there are benefits to the mining fee being halved. Some old mining machines will become unprofitable, and these are notorious for demanding large volumes of electricity. Newer machines use less electricity to perform the same tasks, which means that Bitcoin mining will place less burden on our overall electricity usage as energy-inefficient machines are replaced by more efficient models.

Since the halving, data suggests that more investors are moving their holdings away from exchanges, too. More than $200 million in cryptocurrency has been moved away from exchanges in the days since the halving, possibly suggesting that investors are holding their currency in the hope of a post-halving boom, or potentially indicating that they don’t trust exchanges to keep their money safe and prefer the use of Bitcoin and cryptocurrency wallets.

At 16:50 GMT, Bitcoin (BTC) prices had risen by 6.19% to trade at $9,638.03 while Ethereum (ETH) had added 2.73% to its price and now costs $201.70. Ripple (XRP), which was briefly overtaken by Tether as the world’s third-largest cryptocurrency by market capitalization, rose 0.54%, just enough to overtake the stable coin again and to see it trading at $0.202. Bitcoin Cash (BCH) and Bitcoin SV (BSV) both added to their prices, increasing by 1.95% and 1.61% to change hands at $240.95 and $191.80 respectively.

If you have any questions and comments on Bitcoin today, use the form below to reply.

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