Bitcoin (BTC) prices have been volatile in anticipation of tomorrow’s halving, the third in the cryptocurrency’s 11-year history. Prices rose steadily to a peak of USD 10,025.35 on 8 May before dropping sharply yesterday, reaching a low of USD 8,284.82 today.

Previous halvings have “always been close to major bull runs,” Justin d’Anethan, a Crypto Derivatives Broker at Vantage Capital Markets, comments, “so if history repeats itself, this halving could do the same, which is why many retail investors are enthusiastic or simply afraid of missing out on a potential profit.” 

Demand for Bitcoin has increased dramatically in recent weeks from late April onwards as investors anticipate the lower supply, caused by the halving, will lead to higher prices.

The ongoing COVID-19 pandemic has also led to an increase in monetary supply among central banks as governments scramble to cushion the economic impact of lockdowns, which could drive the value of cryptocurrencies higher. “Traditional currencies are devalued and inflation fears rise on the back of the mass printing of money, the likes of which we have recently seen in the US, where the nation’s central bank has added trillions of dollars to the money supply,” Nigel Green, CEO and founder of financial consultancy deVere Group, says, referring to the USD 2 trillion relief package announced at the end of March to support American workers and the economy.

However, caution is still advised, especially given Bitcoin’s reputation for extreme volatility. “Mining is actually very cheap right now, considering the recent – and massive – drop in oil prices and energy prices,” Justin notes. “If one follows mining cost as a guide to valuing BTC, that could actually be a bearish realisation.”

As for whether now is a good time to buy Bitcoin, analysts advise holding off, at least for now. “In regards to buying Bitcoin, the better time would have been much sooner,” Justin relates. “Notably, BTC was down below or around USD 7K during most of April. This past weekend, it was over USD 10K, so it could look relatively expensive. Personally, I would rather wait until post-halving to see if traders ‘sell the news’, leading to a lower entry price, maybe in the mid-7Ks.”

This article was last updated on 14 May 2020.


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