Over the course of the past month, the crypto world has understandably been abuzz with talks of the upcoming Bitcoin (BTC) halving event that is scheduled to take place in a little over two weeks. For starters, it is undoubtedly one of the most — if not the most — anticipated crypto events of 2020. However, due to the COVID-19 pandemic, many analysts are still not sure if the event will have a substantial impact on the monetary future of Bitcoin.
It is interesting to note that while a number of other traditional assets have seen their values drop quite drastically since the beginning of March, Bitcoin has been mostly able to stave off the huge amount of bearish pressure that has come its way and maintain its value around the $7,000 mark. In fact, on April 23, the premier cryptocurrency witnessed a pre-halving pump that saw the asset’s value move past the $7,500 threshold.
What’s ahead?
While all of the aforementioned signs have been positive for Bitcoin as an investment vehicle, it seems as though the element of uncertainty is very high in comparison to previous halvings.
To gain a better understanding of the situation, Cointelegraph reached out to Scott Freeman, the co-founder of JST Capital, a financial services firm specializing in the digital asset market. He stated that having spoken to a number of individuals operating within the space including miners and institutional investors, the one consistent message that he has heard is that the halving will be somewhat of a nonevent as far as Bitcoin price action goes:
“The halving has been on everyone’s radar screen for a long time and as such, the effect on markets should already be factored into the price of BTC. The halving may affect the profitability of some miners, but we expect at this point that every miner has already made adjustments to their business models.”
In a somewhat similar vein, Meltem Demirors, the chief strategy officer of the digital asset management firm CoinShares, jokingly told Cointelegraph that just like the rest of the economy, the Bitcoin rally around the halving has been canceled until further notice because of the ongoing coronavirus situation. However, she did add that her firm has observed a number of key shifts that have driven increased demand for digital assets. Demirors opined:
“We see demand in the form of increased utility for Bitcoin beyond financial speculation and a growing amount of institutional interest, while new markets for derivatives are increasingly driving prices.”
Market uncertainty divides experts over Bitcoin’s future
Traditionally, a Bitcoin halving event is usually followed by a lot of market hype or fanfare that invariably helps push the price of the currency in an upward direction. However, this time around things are quite different.
To better assess the flagship crypto’s future, Cointelegraph reached out to Jose Llisterri, the co-founder of Interdax, a crypto exchange platform. He pointed out that 16 months following each of the previous having events, the value of the Bitcoin–United States dollar pair has tended to approach its all-time high. He added: “If this trend plays out again, a new all-time high may be reached sometime around or after September 2021.”
Not only that, Llisterri also highlighted that following this upcoming event, only the most efficient miners will be able to continue, as the halving will double their operational costs almost overnight. Furthermore, once inefficient miners shut down, a favorable difficulty adjustment for the remaining miners may be witnessed, thus potentially allowing profit margins to improve as well. He added:
“What’s different this time is that there is now a solid derivatives market, so the impact of miners accumulating might not be as strong as it was during the bull runs in 2013 and 2017. Derivatives such as futures and perpetual swaps give investors and miners the opportunity to hedge their holdings or bet on the future price path of bitcoin, enabling fair price discovery.”
In regard to the matter, Ivailo Jordanov of 7percent Ventures, a United Kingdom-based venture capital firm, believes that due to the ongoing fiscal stimulus, more and more people have started looking for assets that are scarce in nature. In his view, the Bitcoin halving will add to this element of scarcity and potentially make crypto more attractive to the masses.
Similarly, Trent Barnes of ZeroCap, an Australia-based digital assets and foreign exchange solutions firm, believes that due to the number of variables that are currently in play, it is difficult to give an accurate forecast as to how Bitcoin will perform in this current economic climate, adding:
“We expect intense short-term volatility following the halving, both topside and downside. Longer-term, we see price appreciation in line with the stock-to-flow model. I actually wouldn’t be surprised to see it fly under the radar of the general public, meanwhile, the savvy investors will continue to accumulate in the background.”
Lastly, Fredrik Johansson, the founder of Libonomy — a blockchain ecosystem regulated by artificial intelligence — believes that previously the halving events were generally accompanied by great hype in the media, leading to people being exposed to Bitcoin. However, most investors and crypto enthusiasts are now well versed in Bitcoin, and thus a mindless financial boom may not be in the works this time around.
Pundits feel that Google Trends data is meaningless
According to data available on Google Trends, searches pertaining to the term “cryptocurrency” have dipped by nearly 50% since June 2019. However, experts such as Neel Popat, the CEO and co-founder of the cryptocurrency investment platform Donut, are of the opinion that such data is quite limited in its overall scope, as there are several other indicators that can be used to gauge consumer interest in crypto:
“Within the ecosystem, there are new growth areas such as ‘DeFi,’ generating a lot of interest. In terms of masses, they tend to get more excited when there are events and price rises, so if one was to take place post-halving, that's the perfect storm for widespread interest.”
Similarly, Emre Tekisalp, the head of business development at O(1) Labs — the developer behind the Coda protocol — told Cointelegraph that contrary to what data on Google Trends may suggest, curiosity in cryptocurrency as a means of payment and fuel to power the modern-day digital economy has grown substantially among the general public, as well as among governments and various institutions around the world:
“The roll-out of central bank digital currencies (CBDCs) will ultimately make the general public more aware of decentralized alternatives such as Bitcoin and Ethereum.”
Lastly, Nick Hill, the vice president of business development at the asset management firm Invictus Capital, believes that because of all of the substantial stimulus packages that governments all over the world have been rolling out, conversations regarding how money is created in the first place have been reignited. This, in his view, will invariably lead people to once again talk about crypto, as well as how this unique asset class can serve as a bulwark against unfettered money creation by central banks.
Investor confidence in Bitcoin may rise
With traditional commodities such as oil and stocks plunging hard in recent months, with the value of the former reaching its all-time low on April 20, it is worth looking at whether or not the coming few months will see an increase in market confidence in relation to Bitcoin as well as the crypto industry in general.
Expounding his views on the matter, Tanner Philp, the head of corporate development at Kik — a social media messaging platform — told Cointelegraph that it has been extremely impressive to see market confidence remain high in regard to Bitcoin despite all of the insane bearish pressure that the global finance sector has witnessed over the past couple of months:
“I think the capital flight in Bitcoin and crypto, in general, is less correlated to the halvening and more so a need for people to establish cash positions in the midst of a pandemic. My view is that for the most part crypto is still held as a speculative asset, but that for it to emerge as a multi-trillion dollar asset, it needs to move beyond that to be used as a currency. I think the industry is making strides there."
In regard to whether or not investors have become more educated about Bitcoin, as well as crypto technology in general, it is quite clear that since the initial coin offering bubble of 2017, people have become more mature in the way they evaluate various altcoins and other associated crypto offerings.
But while awareness is higher than ever before, digital currencies are, realistically speaking, still quite far from universal adoption. However, many experts believe that during times of crisis — such as the current one — new businesses and technologies can emerge, and therefore right now could be a great time for crypto to show its advantages and gain widespread adoption.
On the subject, Andy Ji, the co-founder of Ontology — a public blockchain and distributed collaboration platform — believes that even though Bitcoin’s dizzying price highs of late 2017 and the subsequent drop have given people the impression that the asset is subject to uncontrollable volatility, Bitcoin has recently reverted to a more regular pattern of growth that has been relatively undisturbed by external market fluctuations:
"There has been a heightened awareness among citizens over the past twelve months around the potential of Bitcoin, its core attributes, and the Bitcoin-powered avenues users can pursue. Now, each month, there are new swathes of savvy digital payments users emerging, aided, in part, by the heightened application of crypto and blockchain technology more broadly among enterprises with household names.”