Bitcoin’s third halving is less than a day away, and the cryptocurrency community remains divided over whether the price will go up or down after the event. Interestingly, the “on-chain” data from the previous halving suggests that the bitcoin price may not drop immediately after entry.
Google Trends data shows that halving search queries has already peaked historically and the cryptocurrency community has released a number of post-halving price estimates.
Some analysts have referred to the Efficient Market Hypothesis to support their view that the halving is already included in the current price, which means that this is a predictable event that investors can consider in advance. Even a well-known Bitcoin whale named Joe007 recently argued that Bitcoin’s price would collapse after halving.
What do the on-chain data show?
Blockchain data shared by the on-chain data analysis company CryptoQuant shows that miners are not interested in selling their newly minted BTC before halving. CryptoQuant has used the Mining Position Index (MPI) to determine that miners have avoided sales in the past three months.
Mining position index. Source: CryptoQuant
A reading of the MPI prior to 2 indicates that miners are selling their BTC after mining, while a negative reading shows that they are avoiding selling as much as possible in favor of accumulation.
As shown in the graph above, the MPI was slightly above 0 in December 2019 and started falling in January. By February the reading had reached -0.5.
Miners don’t sell immediately
Bitcoin miners have historically been a driving force behind Bitcoin’s pricebecause they are the providers of new currencies on the market. They are also one of the main groups that put constant selling pressure on BTC as they liquidate newly minted coins to cover their electricity and operating costs.
The mood in mining is therefore important for the market and is closely monitored by investors. In 2017, when the price of Bitcoin hit a new all-time high of nearly $ 20,000, The MPI peaked at 3.9, showing that miners were selling coins that they apparently thought were too expensive.
In the subsequent one-year bear market, the MPI fell below -1, showing that miners avoided selling as much as possible despite low prices.
Data shows that miners did not sell their funds immediately in the first and second half of the year. Before halving, the MPI was below 0 and the MPI rose as the price rose. When the MPI exceeded 2 a few months after halving, the price plummeted.
When the first halving took place in November 2012, Miners held the upward trend until April 2013 and finally started selling their coins.
CryptoQuant CSO Mason Yang told Cointelegraph:
After the last two halves, the price of Bitcoin did not rise immediately after it entered. The Bitcoin price had been rising for several months. If traders want to avoid trading risks, the most important thing to monitor is whether whales and miners are charging fees, rather than expecting short-term price changes.
MPI changes during previous Bitcoin halving. Source: CryptoQuant
The role of Bitcoin miners is expected to decrease in 2020
The crypto space has evolved significantly since the last halving in 2016. Data from the crypto data provider CryptoCompare show that the daily trading volume in 2020 was consistently at least ten times higher than in 2016.
In 2016, bitcoin volume seldom exceeded $ 1 billion a day on the spot or on the exchanges, while it now consistently exceeds $ 10 billion a day. Readers will also find that there were record volumes on the way to halving Bitcoin on April 30.
Total point volume. Source: CryptoCompare
The markets for cryptocurrency derivatives have also grown significantly. Binance, Huobi, OKEx and BitMEX each trade over $ 50 billion in April. This suggests that Bitcoin miners are now smaller players in space, although they are still responsible for creating constant selling pressure on the Bitcoin price.
Matt D’souza, CEO of Blockware Solutions, recently said to Cointelegraph:
I think we can get a little bit of it by buying the rumor and selling the news. In 2016, before halving, we had a significant 80% increase that was sold for halving and sold even more on the day of the event. We touched the ground 3 weeks after halving and started an incredible upward trend. This time we did not have the previous period, but we are currently receiving some purchase demand. I believe that it will be sold right on or after the halving, but I also believe that the deal will be less and less profound since we didn’t have the previous period.
It is unlikely that mining sales pressure as such immediately after halving this year will have such a big impact on Bitcoin’s price.
Obviously past performance is no guarantee of future results. But it’s worth considering as miners mint 1,800 BTC (nearly $ 18 million) a day.
Exchange income provides valuable information
Cryptocurrency exchange earnings can be a better indicator of what will happen at the halving time. These precede significant price increases and sharp declines when miners and whales shift currencies to trading platforms before price changes occur.
As shown in the inflow curve below, there was an increase to $ 3,750 before and during the March 13 market crash.
Total BTC earnings for all purses. Source: CryptoQuant
After Black Thursday collapse, inflows have remained relatively low as whales and miners have not transported coins from their wallets to trading platforms.. This suggests that they may expect the price to develop as in the last two halving events.
Whatever the price movement in the short term after halving, many are optimistic about the event, especially long term. According to D’souza:
Overall, we seem to be in transition to a bull market. Fundamentals for Bitcoin have never been better, and funds, retailers, and Hodler are investing capital in Bitcoin to address selling pressures.