Well, well… Did anybody see this coming? After spending the last few weeks in extremely bullish territory, the world’s number one cryptocurrency by market cap – bitcoin – has decided to shed more than $1,000 in a single night.
Why Did Bitcoin Crash?
This is the exact opposite of last week when the currency decided to gain that much within a 24-hour span. The currency shocked the entire market and decided to spike from the high $8,000 range to the high $9,000 range, adding close to $1,000 to its price within a single night. Now, however, it appears the currency has decided that the opposite maneuver is in its best interest.
But why, suddenly? Bitcoin has been enjoying some extremely bullish trends for some time and has even been flirting with the $10,000 mark for the past few days. Why would it suddenly come crashing down? It doesn’t make sense.
Unless one really considers that some analysts have been claiming the upcoming halving isn’t so good for bitcoin in the long run. While most of the sentiment surrounding next Tuesday’s halving is bullish, some analysts out there have claimed that things are not going to turn out so well once bitcoin mining rewards are cut down for those extracting new coin blocks.
Bitcoin has halved twice in the past: once in 2012, the other in 2016. 2012 was an interesting time in that at that point, many bitcoin miners were earning as many as 50 BTC units for extracting new bitcoin blocks. Now, to be fair, bitcoin wasn’t trading anywhere near the price it was at today, so even though 50 sounds like a big number, the rewards weren’t as great as one might imagine.
If those miners, however, put their reward stashes away and let them grow, well… That’s a different story. Those people are indeed quite rich.
In 2016, after miners were receiving 25 BTC units for their work for the last four years, bitcoin halved again, this time reducing rewards down to about 12.5 BTC units. This third halving, which will occur tomorrow, is set to bring rewards down to about 6.25 units.
Maybe the Halving Isn’t Such a Good Thing
These past two events have often resulted in bullish activity for bitcoin, but this third one has spread a healthy dose of doubt amongst some analysts. James Harris of Crypto Compare recently stated in an interview:
While we see real reasons to be bullish about bitcoin from both a macro and micro economic perspective, the fact is that the market ecosystem is markedly different from the previous two halvings. Previously, miners selling was a far greater proportion of overall trading flows, so a net decrease in their activity may have had a greater impact in the past.”
At the time of writing, bitcoin is trading for just over $8,400 – a $1,300 decrease from yesterday.