Halving of Bitcoin: will the price disappoint the predictions?

Until yesterday, there were many predictions circulating that the price of Bitcoin could have reached new all-time highs before the halving.

Yesterday, however, this forecast suddenly seems less credible.

Summary

• The drop in the price of Bitcoin despite pre-halving predictions
• The causes
• The boom in profits of miners

The drop in the price of Bitcoin despite pre-halving predictions

After reaching an all-time high on March 14th, at $73,800, the price of Bitcoin had dropped.

With a correction lasting about a week, it had briefly returned to around $60,000, before bouncing back and continuing the correction up to $63,000. That correction actually had a reference level of $65,000, around which the price of BTC oscillated for about ten days.

The correction stopped on March 24, with a bounce that brought the price back to around $70,000, where it remained for about a week.

Yesterday this brief period of sideways movement around $70,000 came to an end.

The decline started more or less with the reopening of the US stock exchanges after the weekend, and followed their own decline.

However, while for the US stock markets it was a fairly contained drop, for the price of Bitcoin it seems that a new correction has started.

Tonight, regardless of the positive performance of Asian stock markets, the price of BTC suddenly dropped below $67,000.

This -4.5% drop in less than 24 hours does not seem to be due to the general trend of the financial markets, even though it appears to have been triggered by yesterday’s drop in the US stock market.

The causes

Yesterday’s drop in financial markets could be due to the danger of an escalation of hostilities in the Middle East, caused by Israel’s attack in Syria against Iran.

The problem is that much of the oil consumed in the West also comes from the Middle East, and although neither Israel nor Syria are big oil exporters, Iran is.

The risk is that exports may decrease, causing an increase in the cost of oil, and therefore inflation. In fact, until a few days ago, the markets were convinced that the Fed would start cutting interest rates in June, but now this prospect has weakened a bit, so much so that the markets themselves are shifting their focus to July.

The price of Bitcoin is linked to the liquidity present in the financial markets, and a failure to cut interest rates would contribute to the continued reduction of this liquidity.

On the other hand, during the night some fears have spread regarding the world’s largest crypto exchange, Binance.

Binance Labs is suspected of starting to sell some of its investment tokens. According to SpotOnChain, the Binance Labs address (0x2e…e6c2) transferred 9.33 million GMT ($3.14 million) to Binance Deposit today. There are currently 9 million GMT remaining. Binance Labs is a…

— Wu Blockchain (@WuBlockchain) April 2, 2024

Indeed, it has been discovered that Binance Labs may have started selling some of its investment tokens, in particular GMT.

Today GMT loses almost 10%, but for example BNB stops at -4%.

The risk that seems to be there is that the new course of Binance could give less and less space and visibility to the launchpool, and perhaps focus on the more established cryptocurrencies, thus greatly reducing the interest of retail speculators in the crypto market.

Meanwhile, however, there are other blockchains, in particular Solana and Toncoin, on which many new tokens are being launched.

The boom in profits of miners

The Bitcoin halving is expected to occur between the 20th and 21st of April.

It will consist in halving the reward for miners, and this raises doubts about the sustainability of some miners.

Yesterday for example on the stock exchange Riot Platforms lost more than 6% in a single session, and Marathon Digital Holdings more than 4%.

But beyond fears about their sustainability after the halving, for now they are racking up record profits thanks to fees.

Indeed, the reward for now remains fixed at 6.25 BTC for each mined block, while transaction fees have increased.

However, a block is always mined approximately every 9 and a half minutes, ensuring that the rewards collected by miners remain more or less the same until the halving.

Instead, the average transaction fees have increased from $4 at the end of February to $16 at the beginning of March, remaining above $6 until mid-month. Starting from March 17th, they have slightly decreased, but still remaining above $4.

During the month of March, thanks to the new all-time high price of BTC, miners recorded a record of 2 billion dollars collected overall in a month. It had been since 2021 that they hadn’t collected so much.

However, it is worth noting that the bulk of this revenue came from awards, because as far as fees are concerned, the overall revenue was “only” about 86 million dollars.

Due to this discrepancy, doubts about the possible sustainability of all miners after the halving are becoming more consistent, since with the halving their earnings will practically be halved, or almost halved.

If, as possible, the correction of the BTC price were to continue even after the halving, for many of them it could become difficult to continue mining, because they would risk doing it at a loss.

However, thanks on one hand to the purchase of more efficient machines that reduce costs, and on the other hand to a possible new rise in the price of Bitcoin in the future, they could become competitive again.

It should not be forgotten that the impact of the halving on the price of BTC is usually only seen several months after the event, so it may be necessary to wait until at least July to start seeing it.

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