New research from the crypto mining operation Blockware Solutions offers a detailed breakdown of what may happen as the highly-anticipated Bitcoin halving arrives.
The event, which is set to occur in May, will slice in half the BTC reward that miners earn for processing transactions. Its immediate impact on the Bitcoin and cryptocurrency markets has been highly debated for months.
According to the report, the halving is likely to trigger a “shakeout before the breakout”. The shakeout phase could see widespread capitulation as Bitcoin miners who can’t afford to pay their bills sell their BTC holdings and switch off their rigs, causing the price of BTC to drop down to $5,000.
After all the inefficient miners have capitulated, the firm says a significant amount of the sell pressure from miners will be removed, leaving a solid backbone of strong miners who don’t need to offload their Bitcoin.
In addition, Blockware Solutions analyzes Bitcoin’s built-in difficulty adjustment, which automatically reviews network activity and adjusts how much computing power is required to process transactions. The researchers expect it to be a key factor keeping miners in the green and ensuring that BTC hits a bottom.
“After miners have shut off (capitulated), newly mined Bitcoin is allocated to the most efficient miners, which minimizes sell pressure on the Bitcoin market as these miners are well above their breakeven prices…
After the Bitcoin Network experiences significant or sustained favorable difficulty adjustments, the likelihood of a bottom in Bitcoin price is enhanced. This is because newly mined Bitcoin is now being distributed to and accumulated by the most efficient miners with healthy balance sheets.”
Researchers say positive psychological sentiment on the halving and excitement over its potential impact on the price may also boost demand for BTC.
“People can claim the halving is priced in, but it is not provable unless you can confirm with a majority of market participants that they have deployed their cash positions and have met their price targets…
A run up into [the] halving is on everyone’s mind and develops positive sentiment on the demand side. This psychological positive sentiment will have market participants anticipating and prepared to deploy cash positions towards upward momentum. Everyone has seen the run ups into [the] halving and everyone, at some point, has missed remarkable rallies in Bitcoin – it is why Bitcoin has more hodlers than any other asset.”
You can check out the full report here.
