The price of Bitcoin (BTC) has rebounded sharply to $ 9,887 since mid-March and has risen by more than $ 6,000 in two months. The rapid rise was expected to halve the block reward on May 12th.
The halving will continue to be the main narrative of the Bitcoin price trend over the next two years, as it has a direct impact on the supply of BTC. It halves the rate at which a new BTC is mined, causing your offer in the market to decrease.
While the long-term positive effect of halving on Bitcoin price is undoubtedly, analysts still believe that three main factors will lead to a decline shortly after halving.
Bitcoin is overbought
The Relative Strength Index (RSI), an indicator used to determine whether an asset is oversold or overbought, indicates high overbought conditions for Bitcoin.
On the daily chart, the RSI is 79. Any value above 75 is considered overbought and below 30 is oversold.
The last time the RSI was so high was on February 9 when the price of BTC was $ 10,100. At that point, BTC rose to $ 10,500, but eventually fell to $ 8,000 in a month.
Bitcoin RSI chart for the BTC-USD pair. Source: TradingView
On March 12, 33 days after BTC’s RSI rose above 75, Bitcoin’s price dropped to $ 3,600.
There are also counter arguments for high RSI values. Some argue that Bitcoin may remain oversold longer in an expanded bull market than in normal price cycles. Depending on the price movement of Bitcoin, RSI can therefore act as a positive catalyst for the dominant cryptocurrency.
Earlier price cycles after halving provide information
After the second cut in Bitcoin in 2016, the price of BTC fell immediately, and analysts predict that the next cut in half will lead to a similar result.
Selling after a highly anticipated event usually takes place in the cryptocurrency market, where investors respond with a “sell the news” approach. When overfunded investors are forced to lower their positions and hope the event will go down, the price of Bitcoin tends to recover.
Logan Han, a hedge fund manager and cryptocurrency investor, suggested that Bitcoin price is likely to respond with a sale after halving it.
A possible sale of Bitcoin after halving. Source: Logan Han
Another cryptocurrency trader, known as Satoshi Flipper, said BTC could test the $ 8,000 region after halving after repeating the $ 9,400 resistance level.
A fall to the $ 7,000 to $ 8,000 range at the end of May would correspond to Bitcoin’s previous price cycles in 2012 and 2016, when the first and second halves were triggered.
Possible Bitcoin price trend scenario after halving. Source: Satoshi pinball machine
A stock market correction could affect Bitcoin’s price
The US stock market has shown strong momentum in recent weeks as the US, Spain and Italy are preparing to reopen their economies.
In a recent interview with ABC, President of the United States Donald Trump, confirmed his decision to reopen the United States. reliant on social distancing as soon as possible to reduce the spread of the coronavirus.
Just like in the crypto market, there is a strong chance that the stock market will react with a sale when the economy opens again.
Currently, several high profile billionaire investors hold cash and hedge positions despite the recent stock recovery. This shows that confidence in a full market recovery is relatively low.
A short-term retreat in equity markets as a result of poor second-quarter earnings, a slowdown in global economic growth and the struggles of large conglomerates could increase selling pressure on high-risk assets such as single stocks and Bitcoin.