There are only about 213 days left before the Bitcoin reward halving will occur next year. At that time, the mining reward for each block generated will only be 3.125 Bitcoins. This paves the way to eliminate deflation and trigger a rise in currency prices, and the cryptocurrency mania Investors are also eager to welcome the expected surge in gains and eliminate the current short market downturn. However, before such expectations are realized, the bears may still make a final blow and continue to suppress the bulls.
According to Rekt Capital, before the halving event, Bitcoin usually goes through a "relief period" before the price drops sharply, which will lead to "macro higher lows" in the Bitcoin cycle. For example, looking back at 2019, which is about the time before the Bitcoin halving cycle, the price of Bitcoin plummeted by 62% after a sharp rise.
Will Bitcoin drop below $20,000 again?
Bitcoin is clearly in a relief phase right now. If historical precedent is anything to go by, there should be a wave of price drops before Bitcoin finally surges as expected. Given the unique factors of this halving cycle, Bitcoin does not need to drop significantly to create a higher low in the cycle.
According to calculations by Rekt Capital, Bitcoin only needs to plummet 27% from the current level of around US$26,000 to around US$19,000 to meet the conditions required for this "capitulation".
Note that when the total amount of energy deployed on the Bitcoin network is taken into account, the fair value of Bitcoin is currently sitting at around $46,000. In addition, the court recently ordered the U.S. Securities and Exchange Commission to re-examine Grayscale’s application to convert the Bitcoin Trust into a spot ETF. In the future, we may see a large number of spot Bitcoin ETFs launched on the market, which will increase the inflow of funds and the price of Bitcoin. Big gains pave the way.
HODLers’ currency holdings become a key indicator
On the other hand, according to the latest data, the supply of Bitcoin currently held by long-term holders is close to an all-time high. In the first few cycles, this represents a signal of a macro bottom, and then the early stages of a new cycle will usher in.
Historically, the supply of Bitcoin among long-term holders has been a good indicator of the health of the cryptocurrency market. This indicator has a negative correlation with Bitcoin's long-term currency price trend.
Long-term holders will keep their assets intact during market bottoms, and in their hands, the maximum supply increase usually occurs during violent short markets. This is what happens when these long-term investors see the price of Bitcoin collapse and are reluctant to sell. They continue to maintain their holdings of cryptocurrencies, believing that the cryptocurrency market will one day rebound and their investment will prove profitable.
On the contrary, during a surging bull market, long-term currency holders will reduce their holdings, because the surge in Bitcoin prices will make these long-term currency holders more willing to sell their assets in exchange for profits.
Historically, every bullish market period has seen a sharp decrease in the supply of Bitcoin held by long-term holders. Naturally, these Bitcoins flow into the hands of short-term holders who jump into the market at the end of the rise in the hope of making quick money and profiting in the short term.
