Cryptocurrency investors are holding on and buying more Bitcoin as the halving event remains only a few days away.
Bitcoin is Overbought
Recent data suggests that more investors are accumulating Bitcoin as we are barely 30 days away from the mining halving event. The seven-day moving average of the total number of BTC held in cryptocurrency exchanges dropped to 2,214,365 on the 14th of April, down by 8 percent. The drop was from its high of 2,404,786 registered on January 17, 2020. This is the lowest level recorded for months now. This according to data obtained from blockchain intelligence firm Glassnode.
According to Glassnode, the decline in Bitcoin available on exchanges was due to investors now thinking long-term and moving their assets to cold storage wallets and other custodial platforms.
The long-term strategy by investors is a sign that they believe that the Bitcoin price will rise over the coming months. When it is time to sell, these investors will then likely move the coins from their personal wallets to exchanges on the expectation that the price of this digital asset will crash in the short-term.
An example of this is when the BTC price dipped by 33% in the seven days to March 15. During that period, the seven-day average of BTC on cryptocurrency exchanges increased from 2,333,279 on March 11 to 2,350,795 on March 18.
Despite that, the spike was short-lived as the number of coins on crypto exchanges dipped again on March 19. The increased levels of Bitcoin holding could be due to bullish expectations related to the mining rewards halving, which is expected to take place 26 days from now. The mining rewards halving is aimed at controlling inflation on the Bitcoin network. This upcoming event will see mining rewards slashed from 12.5 BTC to 6.25 BTC.
This means miners will be adding fewer blocks to the Bitcoin network after the halving. According to most analysts, the event is likely to lead to a supply deficit, which could lead to a surge in the price of the digital asset. Richard Rosenblum, head of trading at GSR, stated that once Bitcoin has its halving in May, the expectation is for the prices to rally, which is then likely to carry the rest of the market with it.
How High Will the Bitcoin Price Climb?
The analysis by cryptocurrency exchange Luno shows that the Bitcoin price could push up to $100,000 after the halving. In addition to this, Bitcoin is expected to become more appealing to investors due to recent events such as the coronavirus-induced global economic recession and the monetary and fiscal stimulus launched by the U.S Federal Reserve.
Despite the optimism, some observers are skeptical about a bull run following the halving event. Jason Williams, the co-founder of digital asset fund Morgan Creek Digital, expressed his thoughts in December. He stated that the expected Bitcoin halving which will take place in May 2020, will not have any impact on the price of Bitcoin. In fact, Williams stated that it will be a “non-event.”
Bitcoin has failed to serve as a safe-haven asset in this current economic crisis. Bitcoin has been underperforming, similar to the equities markets. Instead, investors have turned to gold and other precious metals as safe-havens during this COVID-19-induced recession.