Utkarsh Gupta

With just over a week to go until the 3rd Bitcoin halving occurs, Bitcoin hashrate is not operating at all-time high levels after dropping below 100 m TH / s back in March.

Hashrate is a direct indicator of how the miners react before the incoming event, and the recent rise in the total hashrate may be a hint of certain trends.

According to blockchain.com, the total  BTC hashrate has slowly climbed up in the charts since April, and by 3 May the registered hashrate was 113 million TH / s. The all-time high level was witnessed on 7 March, when the total hashrate was over 120 million TH / s.

While many speculate that following the halving, Bitcoin’s price will undergo a hike, historically it takes a bit of time before the rally begins. However, it is imperative to understand miners’ sentiment at the moment, which would not be the same as earlier halvings.

What does higher hashrate mean at the moment?

Higher Bitcoin hashrate directly translates into the fact that more computing power is currently enforced in the network. Higher hash power, among other things, makes it difficult for miners to mine BTCs as they become more competitive.

Now, historically, the hashrate has gone up during previous pre-halving periods as well, as miners hoard in the network to accumulate as much BTC before the blocks rewards are slashed. That could be one of the major reasons, indicating that miners are trying to take advantage of these last few days of 12.5 BTC block rewards.

But are miners profitable at present?

According to a number of reports and analyzes, it has been widely suggested that bitcoin miners remain profitable in space and will be able to continue their post halving operation if the valuation of bitcoin stayed above $7000-$7500.

Now, the good news is that bitcoin’s latest price movement in the chart has most likely strengthened miner’s sentiment in the charts. Bitcoin spiked from below $7500, up to $9300 in a two-day span on April 29-30, and the asset has been able to consolidate above $8500 in the last few days.

Miners would not be disappointed with that, hence in order to more BTC during this price point, it is likely miners are putting in more hash power at the moment in order to be as profitable as possible for the reduced rewards.

But will the situation be the same post-halving?

Post-halving, the situation might get a little bit tricky for small-term miners. Over the past two halvings, Bitcoin has generally registered a dip alongside its hashrate, during the first few weeks as the network undergoes in difficulty adjustment.

Now with the drop in difficulty, it also becomes easier to mine Bitcoin but alongside difficulty, BTC’s price is expected to plummet to a certain degree as well.

Hence, post-halving, the community may as well see Bitcoin dropped down below $7000-$7500 again, as small-miners shut down their operation for a temporary period.

However, the current activity levels were positive signs for the network, which suggests that in spite of the incoming halving, miners are mostly Bullish for the largest digital asset.

With only 10 days to go for the highly anticipated Bitcoin halving, the community has begun to brace itself for a period of high volatility and price swings in the space. With a part of the community expecting the price to boom after the event, whereas another predicting a huge slump, there were interesting arguments on both sides of the plateau.

However, Arcane Research’s recent blog post identified a few key factors that were missed by everyone and could end up being key over the next two weeks.

How much will Demand and Inflation rate come into play?

When people talk about prices going up and down, the community ends up ignoring the major factors that dictate valuations. One of the main changes that will be implemented right off the bat after halving is the drop in the inflation rate for Bitcoin. Bitcoin’s inflation rate would drop from 3.6% to 1.8% post halving, which means that without a change in demand, the halving should only trigger a 1.8% price increase over the first year after the halving.

Now, change in demand is the key phrase here.

Bitcoin prices will definitely be decided on the demand for the asset and, following the recent rally, BTC’s market is already hot and active, so it won’t be shocking for Bitcoin to undergo a surge in pre and post halving interest and demand.

The case of Marginal Buyers and Sellers 

Now, before we explain, it is important to understand that Marginal buyers and sellers are the people who make quick market transitions during a competitive period.

With Bitcoin holding being a huge sentiment in the midst of the proponents at the moment, it was indicated that the price could be determined to some extent by the marginal buyer and the marginal seller and not by the holders alone.

The report stated,

“The halving could tilt the balance between the marginal buyers and sellers, setting off a bull market with a feedback loop where more people want to buy when the price rise.”

Hence, it is possible that a pre-halving pump would surface again and the underlying rate of growth and awareness would drive Bitcoin’s price towards new highs.

Bitcoin Halving Day: A non-event?

Now, the effects of halving before and after legitimate reasoning, but the halving day itself could be a big non-event. It was indicated that Bitcoin’s options market would have a tendency for all the trader to be more interested in hedged downside risk with put options than to speculate on a large upside with OTM call options.

The non-halving argument makes sense considering the impacts of the block rewards slashing down by half with not trigger an immediate Ripple effect, as the changes will be witnessed gradually in the ecosystem. With 10 days to go, it will only get more interesting on how Bitcoin behaves pre-halving, in terms of price and sentiment.