Even though it’s been a bumpy ride for the bitcoin price of late, the crypto community has been banking on one major event to shift trading sentiment, and that’s the 2020 halving. With bitcoin’s third-ever halving just five months away, investors are convinced that history will repeat itself and it will prove to be a bullish event for the leading cryptocurrency.
The bitcoin halving represents a 50% drop in the block rewards, which lowers the total BTC supply mined from a single block from 12.5 to 6.25 bitcoins. It’s only happened twice in bitcoin’s 11-year history, both of which were upward catalysts for the BTC market. While the bitcoin price has been wildly volatile in 2019, many are hoping that the upcoming milestone will send the BTC price to the moon once again.
Not so fast, says one crypto portfolio manager, who warns that the highly anticipated event could be a non-starter for the BTC price. Coinshares chief strategy officer Meltem Demirors burst the bubble of many crypto enthusiasts when she tweeted about “a very real possibility that price of bitcoin does not go up after halving,” which was met with a collective sigh by the community. Demirors points to a “robust derivatives market” comprised of bitcoin futures and options that have created demand to speculate on the cryptocurrency by trading the derivative instead of the underlying asset.
Source: Twitter
The bitcoin derivatives market is comprised of players such as BitMEX, the CME Group, and most recently Bakkt, among other players that have only recently entered the fray, including Binance Futures. Bakkt, for one, continues to set new BTC futures contracts volume records.
Source: TwitterIf bitcoin trades like any other commodity, “producers set the price,” she argued. But Demirors went onto explain that the maturing of a commodity’s derivatives market – which is happening in the BTC market – means “producers lose the right to set prices.” She points to the oil market as an example, where most firms trade the commodity with paper contracts and the price is largely fueled by speculation.
Source: TwitterDemirors goes on to say:
“The more bitcoin becomes an investable asset, the more it’s price becomes decoupled from its value and its supply and demand. it becomes yet another backwater in the great game of global speculation. it becomes “financialized.” it becomes correlated to macro markets.”
The silver lining in all of this is that bitcoin remains a nascent market, and BTC derivatives even more so. As a result, nobody knows exactly how the asset will evolve let alone perform. Demirors appears focused on the fact that bitcoin derivatives, while an “oxymoron,” remain “the fastest growing part of the market.”
Responses from the crypto community varied, but most followers disagreed with the theory for a host of different reasons, including the fact that bitcoin is not like any legacy asset and therefore comparisons are not relevant. Other followers cut straight to the chase –
Source: TwitterWhether or not the BTC halving event proves to ignite the bitcoin price remains to be seen. One thing is clear. 2019 has been a roller coaster ride and the 2020 halving event is on everybody’s radar.