New research from the Seattle-based crypto startup Strix Leviathan contradicts the narrative that Bitcoin’s upcoming halving will have a major impact on the price of the leading cryptocurrency.
Bitcoin’s halving in May of 2020 will cut the reward miners get for powering the network in half, highlighting the limited supply of the digital asset. But according to the new report, traders shouldn’t expect too much from the event.
“After completing our analysis, we found that there is limited impact of a halving event on pricing action.
Examining total return, Sharpe, and Sortino ratios reveals that assets experiencing a halving — both leading up to and following a halving — perform no better than the rest of the market. In terms of the two most prominent cryptocurrencies in which the halving narrative proliferates, Bitcoin (BTC) & Litecoin (LTC), we see the polar opposite behavior.
LTC has now outperformed the market twice in the pre-halving period with performance falling to the bottom 25% in the six months following the first halving. BTC on the other hand lagged the market leading up to the halving but was in the first quartile of performance following the last halving. The divergence and seemingly random results before and following a halving suggests that the underlying factors driving price is not a shift in supply and demand dynamics.”
A number of crypto analysts have recently focused on Bitcoin’s capped supply of 21 million coins to predict the future price of Bitcoin. One popular method is to apply the stock-to-flow ratio – typically used to predict the price of precious metals – to BTC.
Stock-to-flow calculates the current supply of a given commodity divided by the amount produced per year in order to forecast future value. According to analyst and Bitcoinist contributor FilbFilb, his stock-to-flow projection now tracks Bitcoin’s price history with 99.5% accuracy and indicates BTC will hit $1 million in less than a decade before ultimately hitting $10 million.
You can check out the full research report from Strix Leviathan here.