Over the past three weeks, Bitcoin has tested the resistance at $7000 at least three times but the king coin has not been able to breach past it.With the BTC halving event only 39 days away on 14th May, a major discussion has been whether the halving has been priced in or not. While you can make an argument for both sides of the coin, there is another important factor missed by a few.
Bitcoin prices have fallen like a stack of cards over the past 3 weeks, reacting severely to the current financial crisis in the traditional markets.
With Bitcoin’s valuation currently at a break-even price for the majority of miners (miners remain profitable when BTC is above break-even price), the pro-cyclical behavior of these miners has shown that selling pressure may continue to increase before halving.
The recent difficulty adjustment of 16 percent, which was one of the largest drops in Bitcoin’s history, suggested that miners had already started to shut down their machines as inefficient miners were already claiming a state of capitulation where they are forced to sell their assets to cover the mining expenses.
However, the selling pressure in Bitcoin may undergo a radical shift over the next week.
On April 8th and April 9th, Bitcoin Cash and Bitcoin SV will both undergo their respective halving, which will reduce their block rewards, an entire month earlier than Bitcoin.
BTC, BCH, and BSV all share the same SHA-256 mining algorithm hence, once the block rewards for Bitcoin Cash and Bitcoin SV drops, there is a possibility that miners in BCH and BSV would shift their hash power towards Bitcoin, where they would receive 12.5 unit of block rewards for a month more.
This may lead to an increase in Bitcoin difficulty and the selling pressure in Bitcoin may eventually reduce as well.
Although the selling pressure may drop under BCH, BSV undergo their halving, it is still a major red flag that miners were entering a state of capitulation before the BTC halving, which historically, has only happened after the halving.
On the bright side, capitulation only increases the BTC selling pressure until weak miners are forced off the network.
Once the weak miners’ exit the network, the profit margins for the strong ones increases significantly, which eventually reduces the selling pressure while increasing the price of Bitcoin.
After the BTC halving is concluded, prices would eventually recover and weak miners would re-enter the market and a state of normalcy will prevail.