Bitcoin value crashes ahead of third halving
After rallying to over $10,000 in the past few days, Bitcoin lost more than 10 per cent last night.
It dropped to lows of $8,100 on Luxembourg-based Bitstamp exchange before settling at $8,600, ahead of its third halving today.
The crypto community is readying for the highly-anticipated bitcoin supply squeeze. It will be the third “halving” since the cryptocurrency was created over 10 years ago.
The block reward for mining new bitcoin is halved, meaning that miners will receive 50 per cent less bitcoin for every transaction they verify. Because bitcoin has a finite amount and its supply is reduced over time, the price can be kept stable by reducing the overall supply.
Currently, 12.5 bitcoins are rewarded to miners per block, and this will decrease to 6.25 bitcoin per block.
In the short term, the market is expected to be highly volatile. “Through today we are likely to see increased volatility and tactical trading ahead of the halving,” Marcus Swanepoel, the chief executive of crypto exchange Luno, said. Bitcoin has already seen an uptick in volatility ahead of the event. It started last week at under $9,000 per bitcoin, rallied during the week, before crashing over the weekend.
Analysts predict there will likely be a correction following the halving. “This is likely a “buy the hype, sell the news” scenario, as halvings are typically followed by a price correction before the subsequent bull run,” said Henry Elder, director of investment strategies at Wave Financial Group.
“The likelihood of a correction here is amplified by the general sense of uncertainty pervading all markets at the moment,” he added.
Last week, investor Paul Tudor Jones announced he was buying bitcoin as a hedge against the inflation he anticipates as a result of the coronavirus outbreak and central bank money-printing.