A recent panel at the Swan Pacific bitcoin festival was cleverly titled: “Is Halving Price Cycles Silly?” Throughout the discussion, host and bitcoin Layer founder Nik Bhatia asked Marathon Digital CEO Fred Thiel, Swan CIO Ralph Zagury, and Swan Product Manager Andy Edstrom to share their thoughts. thoughts on whether the bitcoin halving is truly a bullish event or just another narrative that beginner investors buy into.
While the panel’s headline may be discouraging to some, the research is of great interest to all types of bitcoin (btc) and cryptocurrency investors. The conventional belief of many in the space is that the bitcoin supply halving is a bullish phenomenon that, when completed, is followed by a near-parabolic rise in the price of btc.
Go ask any bitcoin lover what they’re most excited about in the coming year and if they don’t first mention the possibility of a timely approval of a bitcoin ETF, they’ll probably say the upcoming halving event.
Previous bitcoin halving events coincided with the rise of bull markets.
But will the macroeconomic conditions be ripe for that next year in May?
~ If we have overcome the initial shock of a recession.
~If a btc spot ETF is approved.
~ If QE returns to the menu.So the planets… pic.twitter.com/g5dEEKiSMF
– ecoinometrics (@ecoinometrics) September 6, 2023
While past performance provides compelling evidence of what could happen at the next halving, questioning long-standing claims and price expectations for a high-volatility asset like bitcoin is probably something every investor should do more often, especially if you consider the number of bearish events that occur. have occurred in the last two years.
To start the discussion, host Nik Bhatia chimed in by asking “if the halving is the main driver of bitcoin price?”
Thiel quickly responded with:
“Not in this cycle, I think it is liquidity”
Zagury agreed, adding that “flow is really what drives the market, so the halving, by definition, has nothing to impact the price.” Interestingly, Edstrom took a different position by suggesting that:
“I think the halving is still bullish and we can debate what the magnitude of that effect is, but yes, I think it still matters for the price.”
All of the panelists, including host Bhatia, seemed to agree that while the halving may have some market movement power, it could be tapering off over time. According to Bhatia,
“The halving affects supply. It is less and less material as time goes by and does not affect demand at all. But from a psychological perspective, we might be able to play devil’s advocate.”
Halving the hype and hopium is on investors’ minds
Speculation is essentially the root of all investing, and while Zagury and Thiel opine that investors attribute more hope than facts to the anticipated impact of the bitcoin halving, Edstrom sees the event as the manifestation of a “psychological feedback loop.” “. entering the demand side.”
“We believe that the price of bitcoin will be higher in the future and, by extension, we are applying an investment lens while investing in bitcoin.”
Another popular belief held for years by many investors is the role that derivatives play in bitcoin price discovery. Bhatia asked if derivatives played a bigger role than spot trading in impacting bitcoin price action and Zagury said:
“The reality is that the data we have, in terms of halving, is not enough to reach any conclusion. If you look at the price of bitcoin historically, we have the entire price data set, and you try to find distribution patterns, of how the returns actually work, very quickly you see that there is a lot of external correlation, which means that the price depends on time. and also from past performance.”
According to Zagury, “one thing about bitcoin that is very curious, and I think there is no other asset class like it, is that most of the time, bitcoin moves either way, in terms of number of days, it is of side or down.”
Related: btc Price Models Point to $130,000 Target After bitcoin Halving in 2024
The time that bitcoin spends trading in a range band or a downtrend is what Zagury says “makes it really hard to hold, right? Because it means you’re going to have months and years of pain and you’re going to have days of pain.” of glory.” .”
“Being a hodler by definition, because of the price distribution seen historically, is extremely difficult.”
Returning to the initial question about the role derivatives play in bitcoin price discovery, Zagury said:
“When we talk about derivatives, the first thing we are going to mention is probability. It is impossible to conclude what is really going to happen to the price of bitcoin; That’s the first thing you conclude when looking at historical returns. Going back to the halving, the fact that it’s actually external is highly correlated, sometimes, in particular times of low liquidity. A small move that increases the price, the marginal seller will pass by the short-term sellers and then the price will increase significantly. This explains why the price rises very, very quickly.”
Liquidity will be the focal point
Despite discounting the impact of the bitcoin supply halving on the price of btc, each panelist expressed their positive and bullish long-term outlook for the value of bitcoin.
Since liquidity is the agreed upon future price catalyst for bitcoin, Zagury said:
“I am very optimistic. “I think we will see it soon, because liquidity has been tightening and we see these things starting to happen and it won’t take us long to see a very big movement.”
When asked when and how this all-important liquidity will return, Edstrom hinted at 10-year U.S. Treasuries rising above 5%, potential regional bank bankruptcies mirroring those seen six months ago, and the growing number of banks holding long duration government bonds. debt losses, are signs that a Fed pivot back to quantitative easing could happen sooner rather than later.
This article does not contain investment advice or recommendations. Every investment and trading move involves risks, and readers should conduct their own research when making a decision.
