Bitcoin sees its best January in 7 years as Halvening nears
After years of January being the worst performing month for Bitcoin investors, the cryptocurrency has had its best performance in nearly a decade. Is the Halvening responsible?
BitcoinBitcoin has just recorded its best January performance in seven years. The cryptocurrency started the month at $7,208, according to data by CoinMarketCap and finished the month yesterday on $9,395. That's a gain of more than 30%.
That last time Bitcoin performed this well in the first month of the year was in 2013, where it saw a 54.50% rally.
Bitcoin's price performance in January over the years has been a turbulent affair.
Looking back over other years, Bitcoin's January performance has been split equally between rises and falls. While 2013 was the currency's biggest gain, 2015 saw the coin's price drop 32% in one month, and in 2018, by 29%. But this year is different. In fact, Bitcoin's price came just short of beating its three month high of $9,488 recorded on November 4. So what's got the price heading in this direction? There have been several reasons.
Earlier in the month, Bitcoin watchers pointed to the US's sudden drone strike against one of Iran's leading generals as the reason for Bitcoin's steady climb out of its low point of $6,597 recorded on December 17.
Bitcoin looks primed to set a new three-month price high. IMAGE: CoinMarketCap.
Within hours of the attack, the price of Bitcoin (along with oil prices) shot up to $7,339. While traditional assets like oil and gold see price rises during periods of uncertainty, Bitcoin has been historically less predictable when it comes to similar geopolitical events. Instead, several industry leaders—including e-Toro’s Mati Greenspan and Matthew Graham of Sino Global Capital—believe the currency’s price is growing because Iranians are buying up Bitcoin as the political environment heats up.
Nothing like the threat of World War III to move markets. The price of Bitcoin today jumped nearly 6 percent and is now trading above the $7,300 per coin mark, according to data from Messari.
And among the contributing factors leading to Bitcoin’s sudden surge appears to be the U.S. drone strike in Iran that killed one of its top military leaders—Qasem Soleimani—at an airport in Baghdad. The cryptocurrency’s price exploded mere hours after the attack, along with oil prices.
New crisis in the Mi...
But within a week, the price of bitcoin had cooled. Next, Bitcoin watchers looked to the Chinese New Year as another cause of the coin's continued rise. But historically, the opposite has been true. Chinese New Year often falls at the same time as a price dump and increased market volatility. The reason, according to some, lies with the tradition of Hóngbāo, which roughly translates to "red package." Every year, millions of red envelopes containing cash are given out as gifts to friends and families. Bitcoin hodlers could, in theory, exchange their Bitcoin for cash for the occasion. Such a sustained sell-off could be sufficient to change the dynamics of supply and demand such that supply outstrips demand, causing Bitcoin prices to tumble as exchange volume drops.
But the opposite was true. Across the period, there wasn't the big sell-off like there had been in previous years. Some have suggested the Corona Virus has hampered people's ability to spend time with family.
The last and possibly the most plausible reason for Bitcoin's stellar January is the Halvening.
What is the Bitcoin Halvening?
In May of this year, the reward for mining a block on the Bitcoin network will half from its current 12.5 BTC to just 6.25 BTC per block. Some believe this reduction in the number of Bitcoin being produced will cause the price to go up. Some have suggested in anticipation of the event, the price has startled to tick upwards. Tyler and Cameron Winklevoss spoke confidently about the Halvening being "big for Bitcoin". But like anything crypto, for every opinion, there is an equal and opposite one saying something completely different.
Crypto luminaries like Meltem Demirors have argued that as the event is known and predictable meaning the price is unlikely to rise in response.
1/ there is a very real possibility the price of bitcoin does not go up after halving.
for the first time, there is a robust derivatives (futures, options) market for bitcoin. most firms looking to speculate on bitcoin will trade a derivative, not the underlying.
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It's been roughly four days since Bitcoin (BTC)’s fourth halving event occurred, and market watchers have amassed enough data to give an early verdict on its effects.
For one, Bitcoin’s supply inflation rate has collapsed, as expected. Each Bitcoin block—mined roughly once every ten minutes—now produces just 3.125 new BTC, half of its former 6.25 BTC block subsidy.
Before the halving, 900 BTC was generated daily, fueling a 1.7% inflation rate. The new figures are roughly equivalent to 450 BTC pe...
Earn a free on-chain NFT by taking our course, "Bitcoin Halving 101: What it Means for Miners and Investors."
Every four years, the amount of Bitcoin doled out to cryptocurrency miners halves in a process imaginatively known as the Bitcoin halving (or halvening, though the term has fallen out of favor in recent years). Here’s why—and how—it works.
Bitcoin’s supply limit
To understand the Bitcoin halving, we must first understand the theory behind its supply.
The inventor of Bitcoin, Satoshi Naka...