Figure 1: Bitcoin on track to the USD 10000 levels (Source: OKEx; Tradingview)
History lessons: Halving strengthened BTC bullish case
The first bitcoin reward halving happened on 28 November 2012, with a backdrop of a deep bearish market. As the halving started to price in, BTC has surged from less than USD5 to more than USD10 in the six months before the first halving. The price even went further to about USD200 in the six months after the halving occurred.
Markets have also seen similar bull runs during the second bitcoin halving in 2016. BTC prices drastically surged from USD400 to over USD640 in the six months before the second halving, and the prices have reached USD1075 in the following six months, representing a 66% increase.
While markets remained unknown about how bitcoin will perform after the upcoming halving in May, but the positive sentiment in bitcoin and the broader cryptocurrency market has become increasingly evident. This bullish momentum could further solidify as the market is likely to give higher expectations on the halving as it approaches closer.
Why has halving ruffled feathers?
In a recent AMA session with Alina Yao, Business Vice President and Head of OKEx Pool admitted that “halving could increase the risk of lower mining profitability and increase of hash rate at the same time.” However, Yao also added that halving’s impact on mining pools might be limited due to the rapid improvement within the sector.
Mining pool has been a highly competitive industry. To stay in the game, pool operators have been improving its infrastructures and technologies, strengthened its effectiveness against market shocks. Moreover, data shows that halving may not result in a shape increase in hash rate.
Bitcoin’s hash rate has been maintained at 27.6T for about 80 days during the first halving event in November 2012. The number didn’t break above 30T until mid-February 2013. Miners have also witnessed a similar stable pattern during the second bitcoin halving. Therefore, halving may not be the primary driver of the hash rate increase even during the halving period.