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deVere CEO: ETF, Lightning, and Halving Drive Recent Bitcoin Rally

After taking a brutal beating throughout much of 2019 thus far, Bitcoin made its largest green one-day candle of the year this past week, providing the market with a much needed relief rally.  Bitcoin’s price rose on Friday over $350 before bouncing off overhead resistance in the cryptocurrency’s current trading range.

CEO of independent financial consultancy firm deVere Group Nigel Green says that the move might be the start of a “considerable Bitcoin surge” stemming from one of three main factors behind this recent rally, but that it is still too soon for investors to begin celebrating.

deVere CEO: History Shows Halving Causes “Considerable Bitcoin Surge”

Following the break of support at $6,000, the crypto market has been deeply entrenched in despair as Bitcoin and other leading cryptocurrencies struggle to find their price bottom. Investors have been burned, and the strain on the industry has caused many companies to begin laying off employees as interest and capital flees the market.

Related Reading | Crypto Analyst Expects Strong BTC Bounce, MACD Signals Bottom

However, Bitcoin’s price woes may be coming to an end, and if history repeats itself, it could lead to a “considerable Bitcoin surge,” according to deVere Group CEO Nigel Green.

Green points to the upcoming “halving” in 2020 – an event that reduces the block reward miners receive for validating transactions by 50% – as a potential catalyst that ends the current crypto bear market.

“The code for mining Bitcoin halves around every four years and the next one is set for May 2020. When the code halves, miners receive 50 per cent fewer coins every few minutes.  History shows that there is typically a considerable Bitcoin surge resulting from halving events,” Green explained.

Litecoin’s halving is due this year, and was the first altcoin to break key resistance and helped to lead the crypto market rally that brought Bitcoin a 10% gain this past Friday, lending credence to Green’s claims. Green, however, says there are two other factors behind Bitcoin’s recent rally.

ETF and Lightning Two Other Key Factors Behind Recent Spike

Green also believes that a recent comments made by SEC commissioner Robert J. Jackson Jr. in which he states a Bitcoin ETF will “eventually” be approved may have given investors renewed confidence in the number 1 crypto by market cap.

Additionally, Green calls attention to recent developments in the second-layer protocol Lighting Network, which he says will “dramatically improve Bitcoin’s well-documented scalability issues, allowing it to move towards mass adoption.” Lightning Network, along with a potential ETF approval and the upcoming halving event are the “three key drivers” behind Bitcoin’s recent rebound, according to deVere.

Related Reading | SEC Commissioner Asks Gov’t to Amend Regulation For Crypto ETF, ICOs

But before investors begin to celebrate the end of the bear market, Green warns that the price was only able to reach the top of the trading range, and that “investors should not be popping champagne corks just yet.”

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Bitcoin’s Next Halving Rally: Coming Soon in 2019

Pascal Thellman is CMO at Bounty0x, a simple service for earning crypto, and an advisor at PolyGrowth, a crypto PR firm.

The following is an exclusive contribution to CoinDesk’s 2018 Year in Review

2018 year in review

2012 and 2016: What do they both have in common?

Bitcoin underwent what is referred to as the “halving,” where the yearly bitcoin inflation was algorithmically reduced by 50 percent. This is part of bitcoin’s deflationary monetary policy and why Austrian economists refer to bitcoin as “hard money.”

If you look at the bitcoin price chart, you will notice that these two years have one more thing in common. The bitcoin price increased significantly the year leading up to the halving. Furthermore, the rally leading up to the halving was in both cases followed by a brutal parabolic move just a few weeks after the halving.

With the next bitcoin halving expected to happen in May 2020, the time has come for investors to start paying attention to this pattern. Historically, the halving starts getting priced in approximately one year before it happens, which would result in bitcoin bottoming out in early 2019 followed by a rally starting in May 2019.

But what if this time is different? It won’t be, let’s explore why.

Bitcoin, Gold and Hard Money

Gold is the oldest form of money in existence.

Unlike ancient money like cattle, seashells or salt, gold can be said to have a hard-coded economic policy: there is a finite gold supply, and only a small portion of the gold supply can be extracted on a yearly basis, effectively setting a cap on its inflation.

This inflation has historically been oscillating between 2 and 3 percent, and the entire global gold supply can fit within the confines of an Olympic Swimming Pool, thus making it a relatively scarce asset. The scarcity, combined with an established history and durability are some of the main factors why it has become the reserve asset of the world, ballooning its market capitalization to $7 trillion.

At the time of writing, Bitcoin’s inflation rate is ~3.8 percent, and it will be reduced to 1.8 percent in the third block reward halving somewhere around May 2020. This will make bitcoin the first asset in the world to become a harder form of money than Gold, while at the same time improving on all of the downsides of gold, mainly portability, divisibility and verifiability.

The brutal algorithmic deflationary model of bitcoin, coupled with its other advantages over gold, will start turning it into an interesting asset for large institutions and eventually central banks. As bitcoin’s deflationary curve becomes more aggressive after the 2020 halving, it will inevitably start evolving into an asset with all of the qualities that large institutions and central banks look for in a reserve asset.

Buy the Event

‘Buy the rumor, sell the news’ is decades-old Wall Street wisdom that works across all markets.

A particular event, like for example a hyped press conference by a public company, gives speculators a date to speculate on, often pushing up prices leading up to the event. After the event concludes, even if the event was positive, the price usually falls because there are no short-term price catalysts for speculators to look forward to.

Due to the inefficiency of cryptocurrency markets, this effect can be observed even stronger in bitcoin and cryptocurrency prices.

A beautiful example of this phenomena was the launch of bitcoin futures by the CME Group. The narrative in late 2017 was that the launch of regulated bitcoin futures would open the gates to institutional investors and elevate bitcoin to unprecedented highs. This narrative was one of the main catalysts that propelled bitcoin to nearly $20,000 at the end of the year.

However, as we know now, the launch of the CME bitcoin futures on December 17, marked the exact top of the 2017 bitcoin bubble.

As data of the last two bitcoin halving clearly shows, the same “Buy the rumor, sell the news” pattern can also be observed in the 12 months prior to the halving. In November 2011, one year prior to the first halving, bitcoin initiated a rally that ended the day of the halving after a 300 percent price increase.

Then again, in July 2015, one year prior to the second halving, bitcoin also started a rally that ended the day of the halving after a 178 percent price increase.

Like it or not, this is how markets work. Speculators will speculate leading up to an important date, the same will be true for bitcoin’s third halving.

Panic Buy the Fundamentals

Miners are currently earning 12.5 bitcoins per block, or approximately 1,800 bitcoins per day.

Although some miners hold a portion of their mined coins, most sell the coins immediately at market price to cover electricity costs and to lock their profit. After the halving in May 2020, miners will now only earn 900 bitcoins per day, reducing the daily bitcoin supply on the market drastically.

As decreasing supply meets constant (or increasing) demand after the halving, prices will inevitably rise to find equilibrium again. The combination of market inefficiency together with the supply reduction shock is what has caused two of bitcoin’s largest parabolic moves.

After the 2012 bitcoin halving, it took the market two months to start feeling the effect of the inflation halving and for bitcoin to initiate a parabolic move that propelled its price from $12 to $142. Interestingly, after the 2016 halving the market felt the inflation reduction even sooner, this time bitcoin started a rally that would bring it from $582 to $20,000 just one month after the halving.

With the third halving less than 18 months away, It’s time to start paying attention to bitcoin’s killer application again: algorithmically enforced monetary policy. The disruptive power of this monetary policy will start getting priced-in in 2019, and when it does, you want to be here.

Have an opinionated take on 2018? CoinDesk is seeking submissions for our 2018 in Review. Email news [at] coindesk.com to learn how to get involved. 

Bitcoin in half image via Shutterstock

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Bitcoin Trend Chart Predicts 2020 Block Halving Could Be Massive For Price

The next Bitcoin block reward halving event could prove to be a watershed moment for its price, according to data currently circulating around social media.


$10 Million By 2023?

A summary of Bitcoin’s price at the first two block halvings uploaded to Reddit by Telegram news channel What’s On Crypto notes that Bitcoin prices increased by orders of magnitude in each period.

At the first halving on November 28, 2012, BTC/USD traded around $12. By the second, on July 9, 2016, it was $657. The third halving — due in mid-2020 or in 644 days — will see the block reward reduce from 12.5 BTC to 6.25 BTC, while What’s On Crypto suggests ongoing trends could see prices hit a giant $10 million by 2023.

The forecast came using a so-called ‘halving line,’ which demonstrates that between the first and second halvings, prices increased bilaterally — 200 percent per year or 3 times year on year.

Former Alcoa Smelting Factory Turns To Crypto Mining In Upstate NY

‘Price Follows Hashrate’

Bitcoin users who had coins during the second halving will remember that contrary to expectations, the event had little impact on prices or market activity.

“In the months leading up to the last two halving events, we saw bitcoin’s price steadily trend upward, and then power higher following the reward halving,” Bitcoinist reported Blockchain research head Garrick Hileman as saying in May this year. Two years off the 2020 event, Hileman’s comments came as Bitcoin’s network hashrate continued breaking all-time highs.

Halvings can make mining Bitcoin less attractive due to a reduction in block reward size, yet hashrate rarely suffers as a result due to difficulty adjustments. “I do not anticipate a significant change in the total mining hash rate due to the halving, at least not in the short run,” Hileman added.

The hashrate tendencies have not gone unnoticed either, with RT host Max Keiser repeating his belief that “price follows hashrate” earlier in August — suggesting an uptick should be imminent. 

What do you think about the Bitcoin halving predictions? Let us know in the comments below! 


Images courtesy of Shutterstock, Twitter.