Expert debate: How good is the Bitcoin halving for the price of Bitcoin?

By Ray Salmond, Cointelegraph; Compiled: Pine Snow, Golden Finance

A panel discussion at the recent Swan Pacific Bitcoin festival had a clever headline: “Is the price cycle halving?” Throughout the discussion, Bitcoin Layer moderator and founder Nik Bhatia asked Marathon Digital CEO Fred Thiel, Swan CIO Ralph Zagury, and Swan Product Manager Andy Edstrom to share whether they see the Bitcoin halving as a truly bullish event or another narrative that novice investors believe.

Although the panel’s title may be off-putting to some, the survey has intrigued a variety of Bitcoin and cryptocurrency investors. The conventional view held by many in the space is that the Bitcoin supply halving is a bullish phenomenon, and once the halving is complete, there will be a near-parabolic rise in the price of Bitcoin.

Go and ask any Bitcoin enthusiast what they’re most looking forward to in the year ahead, and if they don’t mention the opportunity to get spot Bitcoin ETF approval in the first place, they’ll probably say the next halving event.

While previous performance does provide some compelling evidence of what might happen during the next halving, questioning long-standing claims and price expectations for a highly volatile asset like Bitcoin is probably something every investor should do more often, especially given the multiple bear market events that have occurred over the past two years.

To kick off the discussion, moderator Nik Bhatia asked directly: “Is the halving a major driver of Bitcoin’s price?” ”

Thiel was quick to respond: “In this cycle, no, I think it’s liquidity.”

Zaguri agreed, adding that “traffic is really the driver of the market, so by definition, the halving will not affect the price.” Interestingly, Edstrom took a different stance, suggesting: “I think the halving is still bullish and we can discuss the extent of that impact, however, I think it’s still important for prices.” ”

Every panelist, including moderator Bhatia, seemed to agree that while the halving may have some market-driving power, it may diminish over time. According to Bhatia, "The halving affects supply. Over time, it becomes less and less available and has no impact on demand. But from a psychological point of view, we may be able to contradict it. ”

The hype and fantasy of the halving are in the minds of investors

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Speculation is essentially the root of all investment, and while Zaguri and Thiel believe that investors’ prediction of the Bitcoin halving affects more hope than fact, Edstrom sees the event as a manifestation of a “psychological feedback loop” into the demand side. ”

“We believe that the price of bitcoin will be higher in the future, so we apply an investment perspective when investing in bitcoin.”

Another popular belief that many investors have held for years is the role derivatives play in Bitcoin price discovery. Asked by Bhatia if derivatives play a bigger role in influencing bitcoin price movements than spot trading, Zaguri said, “The reality is that in terms of halving, we don’t have enough data points to draw any conclusions.” If you look at the Bitcoin price historically, we’ve got the entire price data set, and you’re trying to figure out how earnings actually work, and soon you’ll see that there’s a lot of external correlation, which means that the price depends on time and past performance. ”

“One of the very curious things about Bitcoin is that most of the time, Bitcoin either moves laterally or in days, it’s either sideways or downward,” Zaguri said. ”

Zaguri said that the time bitcoin trades in range-bound or downtrend “makes it very difficult to hold, right, because it means that you will be going through months or even years of pain while you will have glory days.”

“By definition, in the price distribution seen historically, it is very difficult to be a holder.”

Returning to the original question about the role of derivatives in the price of bitcoin, Zaguri said: "When we talk about derivatives, the first thing you have to talk about is probability. It’s impossible to conclude exactly what will happen to the Bitcoin price, and that’s the first thing you get by looking at historical returns. Going back to the halving issue, in fact, sometimes, especially during periods of low liquidity, it actually has a lot of external correlation. A small move will push up the price, marginal sellers will pass short-term sellers, and then the price will rise significantly. This explains why prices are rising very, very fast. ”

Liquidity will be in the spotlight

Despite ignoring the impact of the Bitcoin supply halving on the price of Bitcoin, each panelist expressed their positive long-term bullish view of Bitcoin’s value.

Since liquidity is a factor in the future price catalyst for bitcoin, Zaguri said: "I am very bullish. I think we’re going to see that very soon because liquidity has been dwindling and we’re seeing these things starting to happen and it won’t take too long for us to see very big changes. ”

Asked when and how this all-important liquidity will return, Edstrom hinted that if the US 10-year Treasury yield rises above 5%, a situation similar to the regional bank bankruptcy seen 6 months ago, and an increasing number of banks holding long-term government bonds and losing money, these are signs that the Fed may be moving to QE sooner.