Bitcoin's post-half crash theory has a serious flaw

• The price of Bitcoin rebounded tremendously in the weeks leading up to its third mining award which halved on May 12, 2020.
• Many analysts believe that the cryptocurrency would suffer a sharp drop in prices after the event, citing historical trends.
• But the fractal ignores a crucial factor that pushed the price of bitcoin down after the second half.

Bitcoin will be the subject of a technical update scheduled for May 12 which would significantly reduce the reward offered to IT operators who "mine" the cryptocurrency by half.

The so-called "halving" is a bullish event, at least according to long-term investors and short-term speculators within the emerging Bitcoin industry. Top analysts with staggering financial histories predict that the third drop in the supply rate would drive prices up exponentially.

The upward sentiment is inspired by the last two halves, each preceding an increase in excess prices, as shown in the graph below.

Meanwhile, there is also a bearish stigma that accompanies an event in half. Analysts say the last two supply reductions have pushed prices down two percent in the main months. One of the reasons for the fall in prices after half is the cost of mining, which doubles.

"Miners" who operated via old mining machines can no longer adapt to new updates from the Bitcoin network. As a result, they start to produce losses: more energy costs, less bitcoin rewards. Those who cannot bear losses end up selling their bitcoin holdings to cover their costs. This ultimately adds to the downward pressure.

Fault

The post-half lock theory focuses on only one aspect of the cryptocurrency ecosystem: miners. Meanwhile, the analogy conveniently ignores other fundamental factors that catalyzed a drop in the price of bitcoin after the drop in the supply rate.

Part of the profits that led to the second half of July 11, 2016 were denied almost two weeks after the event. Furthermore, the collapse only seems to have happened after the announcement of an increase in the Bitcoin exchange which swept away the sentiment of traders.

Looking back, BitFinex lost over $ 60 million in BTC (at current exchange rates: ~ $ 1.05 billion) due to a security breach. Given the scale of the theft, many merchants decided to sell their goods before the pirates. As a result, the price of bitcoin fell 27.09% around the hacking incident.

Also, it was the last time the market saw bitcoin trading under $ 500.

Bitcoin's next halving

Bitcoin could support the FUD after half despite the capitulation of the miners, given that cryptocurrency is in predominant demand. Its price increase above $ 10,000 which led to the event certainly requires correction. But this time, the most important reason for a liquidation is not miners, but a pandemic that forces investors to abandon their risky position.

However, bitcoin increases in the long run.

Photo of Joshua Ness in Unsplash

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