(Kitco News) – Halving day has arrived and the crypto community is excited to put the fourth quadrennial reduction in new BTC supply behind them and get on with the stalled bull market. According to data provided by Crypto.com, the halving is expected to occur around 9:30 pm EST.
While pre-halving periods are known to be volatile, this cycle has also had to contend with rampant inflation, rising geopolitical tensions, and a global economy that is on the ropes after years of money printing and pushing off any hard decisions that could help lead to long-term improvements.
After flash crashing to a low of $59,590 last evening in the wake of Israel launching an attack on Iran, Bitcoin (BTC) bounced back in trading on Friday, hitting a high of $65,500 near midday before pulling back to support at $64,300, where it trades at the time of writing.
BTC/USD Chart by TradingView
A sell-off in Big Tech stocks took a toll on equities prices, leading to a negative close of 0.88% and 2.05% for the S&P and Nasdaq, respectively, while the Dow gained 0.56%. Friday marked the sixth consecutive negative close for the S&P, its longest losing streak of the year.
The weakness across markets has largely been attributed to the Federal Reserve and its flip-flop messaging on interest rates, with the latest comments from Fed officials suggesting that there could be no interest rate cuts in 2024 as inflation remains stubbornly elevated.
The yield on the U.S. 10-year Treasury note ended the week 205 basis points higher than it started, while the DXY gained 0.15%.
Looking beyond the halving
“Over the past weekend, the markets experienced a broad sell-off, affecting both traditional and crypto assets due to escalating geopolitical tensions in the Middle East,” said analysts at Ryze Labs. “This followed Iran's drone attack on Israel, sparking fears of further actions by Israel or its allies.”
“Bitcoin, amid these tensions, dropped to a low of $60,800 before rebounding to $65,000, while most altcoins saw declines of approximately 25-30%,” they said. “This movement underlines that Bitcoin has not yet been embraced as a ‘safe-haven’ asset like ‘digital gold’ among institutional investors, as it did not witness significant inflows during this period.”
“Funding rates across major cryptocurrencies turned sharply negative, with annualized rates falling to this year's lows between -40% and -60%,” they added. “Similarly, the BTC 3-month annualized basis also reached a yearly low at 4.85% on Sunday morning. These metrics reflect strong bearish sentiment, driven by widespread liquidations of long positions and increases in short selling.”
Ryze Labs noted that hawkish comments from Federal Reserve Chair Jerome Powell “initially stirred the markets,” but said “the reaction was relatively subdued, suggesting potential seller fatigue.”
“Looking ahead, we will focus on upcoming inflation data as a critical indicator for future monetary policy direction,” they said. “Observations of a potential stagflationary environment would be particularly concerning, posing risks for the crypto sector at large.”
Turning their focus to the halving, Ryze Labs noted, "Historically, Bitcoin halvings have precipitated significant price movements.”
“These events typically result in short-term market volatility followed by prolonged price increases. The reduction in supply, if met with steady or increasing demand, generally leads to higher prices,” they said. “For instance, after the first halving in 2012, Bitcoin’s price soared from around $13 to nearly $1,000 by the end of 2013, despite an initial drop in the network hash rate and mining difficulty as less profitable miners left the network.”
“Additionally, the stock prices of companies involved in Bitcoin mining have shown notable changes around halving events,” they added. “For example, since early February 2024, Marathon Digital Holdings’ stock price increased by over 45%. Similarly, Riot Platforms experienced significant volatility at the start of 2024 but recovered to $16 from a low of below $10.”
And Ryan Grace, head of tastycrypto, told Kitco Crypto that he doesn’t “see the halving date as the catalyst for price action – it’s likely to be a ‘sell the news’ event.”
“Traders buying ahead of halving are already in BTC,” Grace said. “However, I would anticipate corrections to be short-lived. Using recent ETF approvals as a reference point, BTC corrected -20% following the news.”
“There’s no clear takeaway from prior halving cycles,” he added. “BTC was -10% 1 month after the 2016 halving and +8% in the month following the 2020 halving. During both periods, the price of BTC traded within a 20% range throughout the month following the halving date.”
As for how Bitcoin could perform in the 6 to 18 months following the halving, Grace said, “If this cycle follows the past 4-year halving cycles, we could see a BTC price above $150,000 at its peak.”
“More importantly, the existence of ETFs and increasing global liquidity will drive price post-halving, not the halving itself,” he concluded.
Altcoins close the week on a positive note
The altcoin market closed the week mixed, with a majority of tokens in the top 200 recording gains on Friday.
Daily cryptocurrency market performance. Source: Coin360
Saga (SAGA) led the winners with a gain of 24.5%, while Jito (JTO) climbed 17.3% and dogwifhat (WIF) climbed 17%. Ribbon Finance (RBN) declined by 13.2% to lead the losers, followed by losses of 6.9% for Livepeer (LPT) and 4.9% for Helium (HNT).
The overall cryptocurrency market cap now stands at $2.34 trillion, and Bitcoin’s dominance rate is 54.1%.