Bitcoin was up 20% early today, reaching $9,400 at its peak. If you were still asleep you would have missed it. This is the first time in two months that it’s cleared $8,000, ahead of a key halving in the crypto market.

Within a few hours the price fell back down to $8,600. “Bitcoin was the same price when I woke up as when I went to sleep, but somewhere in between people started losing their minds. I didn’t even know it went to $9400,” said popular trader Scott Melker.

The rally also saw popular San Francisco-based cryptocurrency exchange Coinbase suffer outages. The last time Coinbase crashed, under such huge trading volumes, we saw Bitcoin's biggest bull run.

The Bitcoin halving is imminent

While the rally didn’t last, crypto insiders told Decrypt that it’s an indication of renewed interest in Bitcoin, and a clear precursor of an exciting two weeks ahead, as we approach a seminal event in Bitcoin history.

“People are preparing for the halving event and trying to scoop some sweet BTC before supply halves,” Pedro Febrero, an analyst at Quantum Economics, told Decrypt.

The next Bitcoin Halving event on May 12, will slash the cryptocurrency’s mining reward by half—from 12.5 BTC to 6.25 BTC. Traders anticipate that the new scarcity could make Bitcoin more valuable. But unless Bitcoin’s price makes it profitable to mine, miners risk going out of business and could flood the market with their mined Bitcoin to cover their costs.

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Like many, Joe DiPasquale, CEO of investment fund BitBull Capital considers the halving a hugely positive event, from the historical effect of previous halvings, and believes that market sentiment leading up to it reflects that.

“In the long term, reward halving is a bullish development, especially as fiat currencies around the world are experiencing inflation, and Bitcoin’s supply reduction results in deflation,” he said.

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George McDonaugh, cofounder of blockchain investment firm KR1 plc, agreed. “Narratives in the world of blockchain act like the Force in Star Wars, they mysteriously move and shape the market and in terms of the halving, the Force is strong with this one,” he concluded.

But this time round, unlike previous halvings, investors have the ability to short Bitcoin on new institutional grade exchanges that have far greater liquidity available than ever before, said McDonaugh. “This could provide a counterbalance to the frothy heights of a bull run getting carried away with itself and potentially reduce the possible peaks.”

The power of FOMO

And there were some who warned that today’s early rally was illiquid, overextended and—in its later stages—driven by FOMO (Fear Of Missing Out).

One prominent trader called the upside run an “organized FOMO rally,” with whales persuading smaller traders to enter the market using the “halving” narrative.

But Binance co-founder and CEO Changpeng Zhao was more upbeat. Celebrating the exchange’s 24-hour trading volume reaching a new all-time high ($16 billion), he tweeted that the crypto market was in "FOMO mode now."

This kind of FOMO could well drive crypto and traditional markets much higher in the coming weeks, argues Nigel Green, founder and chief executive of independent financial advisory deVere.

“With a recovery on its way, they don’t want to miss out on the current value in the market long-term, which has the effect of driving markets higher,” he said. “We’re witnessing what is likely to become a powerful recovery in global stock markets as investors look ahead to the latter half of 2020 and into 2021.”

Will Bitcoin reach $10,000 before the halving?

Green believes Bitcoin will reach at least $10,000 before the May event. “The excitement of the forthcoming rare halving event, together with the new era we’re in, will drive the price of Bitcoin exponentially and sustainably,” he said. “Beyond that, we could see an explosion in the price of Bitcoin due to real-world issues it addresses and increasing adoption.”

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Simon Peters, an analyst at global investment platform eToro, agreed. "Miner first spend has been decreasing this week suggesting that overall, miners are choosing to hold. The number of actual participants in the market is also hitting new highs amid the expectation that this halving event will play out like the last one and push the price up sharply. With these tailwinds in place, we think it is likely the price will go above $10,000 before the halving actually takes place,” he said.

But well-known gold bug and Bitcoin critic Peter Schiff, was not so impressed. “Bitcoin is being bid up by speculators, just like other risk assets today,” he tweeted.

And there were more measured voices, including Matthew Graham, CEO of investment firm Sino Global Capital. He said that while he continued to view the halving as a “moderately bullish event,” it wasn’t to the same extent as previous halvings. “Short-term movements are much more difficult to forecast, and even in a bull move scenario we can expect violent shakeouts along the way. Traders should be especially wary of low volume price movements,” he advised.

And while today’s rally fizzled out, longer term data from data analytics startup Skew showed that Bitcoin provided investors 27% rewards since January 1, more than double that of gold and much better than stocks and oil.

Yet Galaxy Digital CEO Mike Novogratz argued both Bitcoin and gold are the ones to look for. He had just two pieces of advice: “Buy Gold. Buy BTC,” he tweeted.

Overall, this growth has seen Bitcoin recover all of the value lost as a result of the crash in the first half of March. The cryptocurrency is now up more than 22% for the year, making it one of the best performing financial instruments in 2020.

Not too shabby.