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.
