Bitcoin is getting jittery before the big “halving” event scheduled for Friday. The top cryptocurrency fell to $59,900 on Wednesday for the first time since early March, almost 17% below its all-time high.
Many of the other major cryptocurrencies also dropped Wednesday, including the second-largest, Ether, which has gone below $3,000, according to crypto tracking website CoinMarketCap.
The Bitcoin halving is due on April 19, cutting the current mining rate to 3.125 Bitcoin from 6.25 Bitcoin. Halving is an integral part of the Bitcoin blockchain system, which creates a monetary system that controls inflation. While this major event has been projected to possibly increase Bitcoin’s price in the long term, Bitcoin’s price has been increasingly volatile recently and will likely continue to be going into the halving.
Why this Bitcoin halving is different
There has been a lot of discussion about this year’s Bitcoin halving being different from all the previous such events. The cryptocurrency’s price reached its peak a month before the halving event, which has never happened before.
Sam Callahan, a senior analyst at Swan Bitcoin, a Bitcoin financial services firm, says Bitcoin is currently in a consolidation phase. “The recent volatility is likely a result of short-term traders placing bets on the outcome of the highly anticipated halving event,” Callahan said in an email.
“If an investor chooses to own Bitcoin, short-term volatility should be expected, but if they zoom out, Bitcoin’s long-term trend remains clear.”
Bitcoin price may not rise quickly after halving
Bitcoin halving has historically boosted the price of the cryptocurrency.
For instance, after the first Bitcoin halving in 2012, the price was $12. It went up to $44 100 days after the event and $135 after 300 days.
Similarly, after the 2016 halving event, the cryptocurrency went from $658 to $1,551 in 300 days.
And in the most recent halving of 2020, the price of $8,601 went to $50,941 within 300 days.
Read more: The big Bitcoin ‘halving’ event is almost here. We’ve got answers to all your questions
CoinDesk reports that Goldman Sachs warns caution due to unpredictable macroeconomic factors regarding Bitcoin’s upcoming halving.
“Historically, the previous three halvings have been accompanied by BTC price appreciation after the halving, although the time it took to reach the all-time highs differs significantly,” said Goldman’s Fixed Income, Currencies and Commodities (FICC) and Equities team per CoinDesk. “Caution should be taken against extrapolating the past cycles and the impact of halving, given the respective prevailing macro conditions.”
In the midst of investor nervousness as well as Bitcoin’s volatility, Rennick Palley, a Founding Partner at Stratos, a crypto venture capital firm, remains optimistic about Bitcoin’s long-term performance.
“There are two headwinds for Bitcoin in the short term, the volatile pre-halving period as well as prior all-time highs, which typically take 2 to 3 attempts to definitively breach,” he said in an email.
“However we expect bitcoin to break through this by mid summer and continue towards 150k plus by 2025.”
