Bitcoin halving is only a week away from now, and the market anticipations running high. The google search trend for ‘Bitcoin Halving’ reports a four fold increase in comparison with the last event in 2016.
Moreover, past investors have also been weary of a ‘sell the news’ event, which is also consistent with last time.
The primary reason predicted for the sell off has been miner capitulation and sell-off due to an up-gradation to newer models. Mati Greenspan, financial and crypto analyst, predicts a major hash-rate plunge following the event. He notes,
The higher the price goes between now and then, the less the hashrate will drop. Still, it’s hard to imagine it rising to the level needed to avoid a major hash plunge.
Death of December 2018 Hardware?
According to the break-even cost depicted in the chart, S9 miners have been under water since the beginning of the bear market in the later half of 2019. With the launch in December 2017, these miners seem to have been phased out in less than 2 years. Moreover, the S15 range was launched November 2018. The owners would look to hold onto these machines awaiting an increase in profitability.
According to the current level of difficulty, the break-even cost for S17 is just under $10,000, which is the latest generation launched in March 2019. Nevertheless, economies of scale (i.e. the scale of the mining farm) also plays a role in improving the profitability. Hence, larger mining farms are likely to operate on lower costs.
Greenspan further notes,
Now, once the event takes place and a lot of the old machines get mothballed, the hashrate will probably come down quite a bit and two weeks later, the difficulty will be adjusted lower so those colorful lines will all come down somewhat.
In the past, Bitcoin halving has led to huge bull rallies, as the sell pressure in the market effectively drops by 50% from the miners. Bitcoin is now entering the 3rd expansion phase. Hence, the long term price sentiments among the majority is bullish, while looking for a buying opportunity with a drop around the event.
The price action in the couple of weeks following mining will be essential in determining the demand, and the reaction from the mining ecosystem.
What percentage of miner capitulation do you think will happen post halving? Please share your views with us.