Crypto

Bitcoin Cash Halving Hints at Bitcoin's $42K Post-Event Dip

Bitcoin Cash's post-halving slump and $5 billion potential BTC miner sell-off signal caution ahead of Bitcoin's fourth halving.

By Barry Stearns

4/12, 08:51 EDT
Bitcoin / U.S. dollar
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Key Takeaway

  • Bitcoin Cash's post-halving price drop and futures interest collapse signal caution for Bitcoin's upcoming halving, potentially tempering immediate bull run expectations.
  • JPMorgan forecasts a post-halving sell-off in Bitcoin to $42,000, suggesting the event may already be priced in.
  • Post-halving miner sales could pressure Bitcoin prices, with a potential $5 billion worth of BTC liquidation affecting market dynamics for months.

Bitcoin Cash Signals Caution Ahead of Bitcoin Halving

As the crypto community counts down to Bitcoin's fourth mining reward halving, an event that historically triggers bull runs, Bitcoin Cash (BCH) presents a cautionary tale. Following its own halving on April 4, which reduced per block coin emission to 3.125 BCH, its price experienced a significant drop from $715 to $604, marking a 15% decline. This downturn was accompanied by a 70% reduction in notional open interest for BCH perpetual futures, falling to $376 million within a week, as reported by CoinGecko. The shift to negative annualized perpetual funding rates across major exchanges suggests a reevaluation of bullish positions, hinting at potential market recalibrations post-halving.

Volatility Surges as Halving Nears

Bitcoin's volatility has unexpectedly outpaced that of Ether (ETH), with its 30-day historical volatility reaching nearly 60%, a notable deviation from its usual market behavior. This surge in volatility comes in the wake of the U.S. Securities and Exchange Commission (SEC) approving several spot bitcoin exchange-traded funds (ETFs), diverting trader focus and amplifying bitcoin's market movements. The anticipation surrounding the halving, set to reduce miner rewards to 3.125 BTC, further fuels this volatility, challenging the notion of Bitcoin as a stabilizing force in crypto portfolios.

Miners and Market Dynamics Post-Halving

The impending halving will halve Bitcoin miners' rewards, prompting a potential $5 billion worth of BTC sales by miners, as estimated by 10X Research. This sell-off could dampen bullish momentum, leading to a period of sideways market movement, reminiscent of post-halving patterns observed in the past. Bitcoin's pre-halving price surge to new highs above $73,000 adds to the intrigue, with analysts like Greg Magadini from Amberdata suggesting a "sell-the-news" pullback might follow the halving. This scenario is echoed by JPMorgan's prediction of a post-halving sell-off to $42,000, challenging the conventional wisdom of halving-induced market booms.

Street Views

  • Wintermute (Neutral on Bitcoin and Bitcoin Cash):

    "Over the last month, fast money has been seen in BCH - potentially trading the coin as a proxy for the upcoming Bitcoin halving; an interesting move in funding rates as perps currently trade under spot."

  • JPMorgan (Bearish on Bitcoin post-halving):

    "Investment banking giant JPMorgan expects a sell-off to $42,000 once the halving hype subsides."

  • Markus Thielen, 10X Research (Neutral on Bitcoin's short-term outlook post-halving):

    "Based on our calculations, miners will potentially liquidate $5 billion worth of BTC after the halving. The overhang from this selling could last four to six months, explaining why bitcoin might go sideways for the next few months – as it has done in the past."