Bitcoin Trades Positive The Day After The Halving; Whats Next?
Bitcoin is trading positive on Tuesday after four gloomy days. The cryptocurrency executed on Monday its third halving ever since it's creation when miners' block reward was cut from 12.5 BTC to 6.25 bitcoin for transaction resolved.
Besides, the CME reported increasing institutional interest ahead of the halving. But at the same time, the Federal Reserve announced its decision to buy corporate bonds ETFs.
Many voices in the crypto industry are calling for a bullish movement, but others recommend taking it easy as the move is priced in.
In that framework, Bitcoin is showing some signs of life after posting four negative days right before the so-called BTC halving. Bitcoin found support at $8.180 on Monday, but it is trading positive on Tuesday. The 10,000 level for the BTC/USD remains a taboo.
Institutional Interest on The Rise
In a blog post published on Sunday, the CME acknowledged the increasing attention in BTC from the institutional side, and it reported open interest on the rise to historic levels.
According to the publication, institutional participation saw a rise in the open interest to $407 million with a record of 8,706 contracts on May 6.
The post said:
Year to date average daily volumes in CME's BTC futures are 8,399 contracts, up 43% compared to the same period in 2019. Large Open Interest Holders (a LOIH is any entity that holds at least 25 BTC contracts) achieved a record of 62 holders on April 14, indicating a resurgence in institutions that want exposure to the cryptocurrency.
In that framework, the CME also commented that a difference from the previous two halvings, the crypto market is now more mature. For the first time, there is "a robust derivatives market for Bitcoin in both futures and options."
That's one of the reasons why the CME reported that 844 unique accounts, including institutional and professional investors, have started trading Bitcoin derivatives in 2020; more than double of new market entrants in the same period of 2019.
Fed Buying Corporate ETFs
Another clue in the current market situation is the latest movement adopted by the Federal Reserve. According to a press release published by the bank, it is launching its corporate debt exchange-traded fund buying program.
The note says:
The Federal Reserve Bank of New York today announced that the Secondary Market Corporate Credit Facility (SMCCF) will begin purchases of exchange-traded funds (ETFs) on May 12.
In plain words, the Fed will buy corporate ETFs starting May 12.
In that line, Bitcoin enthusiasts are complaining about the decision as the Fed will be using a portion of the money it is pumping into the economy for ETH related purchases.
"The central bank is violating its own charter." According to a recent piece published by William Suberg:
Bitcoin (BTC) has only just completed its 'hardening' — but fiat currency is already getting even ‘easier’ as money after a historic move by the United States central bank.
Long story short, Bitcoin investors are complaining because they got another competitor in the market.
As Expert Investor reported in March right after the Unlimited QE announced by the Fed at that time, Bitcoin has been benefiting from the Fed action as money in the United States is cheap. Stocks, futures and derivatives have been rising in the last weeks, including BTC.
More Wallets, But Smaller Amounts
Another sign of increasing interest in BTC is the rising number of small wallets reported by Glassnode on May 11. According to a tweet published by the on-chain market analysis firm, the number of BTC addresses with a balance below 0.01 BTC increased by 235% compared to the reaction after the second halving.
- Addresses > 0 BTC: +235%
- Addresses ≥ 0.01 BTC: +204%
- Addresses ≥ 0.1 BTC: +142%
- Addresses ≥ 1 BTC: +63.2%
- Addresses ≥ 10 BTC: +11.2%
- Addresses ≥ 100 BTC: -6.3%
- Addresses ≥ 1k BTC: +13.2%
What is The Halving For Bitcoin?
But hey, what is the halving? Let's explain it easily and fast. As you may know, Bitcoin is the representation of the blockchain ecosystem and it is created as the reward for verifying a block of Bitcoin transactions.
Miners get rewarded in Bitcoin for successfully verifying information and adding a block of transactions or updating a ledger to the chain. Every 210K blocks, the reward is cut in half.
May 2020 halving is the third ever cut; previously, it happened in 2012 when the reward went from 50 BTC to 25 Bitcoins and 2016 when it was cut to 12.5 BTC. Now, the prize is 6.25 BTC.
Bitcoin Positive After Four Negative Days
Bitcoin is trading positive on Tuesday as the unit found support at $8,135.50 on Monday. Against the US Dollar, the BTC is pricing at $8,765.00, which is 1.70% down on the day.
Overall, the crypto is trading on the defensive after being rejected by the $10,000.00 level on May 8. The 200-day moving average also contains it at 8,041.34.
Bitcoin Bullish Case
As CME highlighted in its post, Bitcoin started rallying 12 months ahead of previous halvings and it "continued for some time after."
The bullish pattern in previous halvings was the same as the BTC unit jumping to fresh highs. Experts expect the same in 2020. Some experts have said that the BTC price could reach six digits in two years, for example.
However, the reaction would not be too fast as the market needs time to rebalance its volume flows.
A Bearish, or Not-That-Bullish Case For BTC
On the other hand, analysts at Robinhood commented that the halving date had been known since 2016. Also, investors know how 'halvenings' happened in the past. Therefore, the event should be priced in the current BTC valuation.
If all investors in the market know that same information (like they did), then they probably already reacted and planned for the Halvening beforehand. That means the event was 'priced in' to the current price, so in theory the Halvening shouldn't move the price much.
BTW, the 630,000th block, which signaled the third ever halving for Bitcoin, was mined by AntPool on May 11 at 3:23 EST. It contained 3,134 transactions and 0.90968084 BTC in fees. The total transaction volume for the block was 3311.62144322 BTC.
Mauricio is a newer member of the team and a very welcome addition. He is a financial journalist and trader with over ten years of experience in stocks, Forex, commodities, and cryptocurrencies. This experience means he has an excellent understanding of the markets and current events.