Another analyst is claiming that the upcoming bitcoin halving – scheduled for May 14, 2020 – will have no effect on bitcoin’s price. The analyst this time is Meltem Demirors, the chief strategy officer of Coin Shares – a firm that manages digital assets.
Demirors: The Halving Isn’t Likely to Do Much
In a series of tweets, Demirors claims that the upcoming halving isn’t likely to boost bitcoin’s price or influence it positively. She lists up to five reasons why. For the first, she claims:
There is a very real possibility the price of bitcoin does not go up after halving. For the first time, there is a robust derivative (futures, options) market for bitcoin. Most firms looking to speculate on bitcoin will trade a derivative, not the underlying.
What this comes down to is that most traders and investors are looking to get involved in products of bitcoin, rather than bitcoin itself. The coin seems to have lost some stamina, and thus many are looking more to get into the prospects of futures trading rather than trades involving the actual currency.
We’ve already witnessed this behavior in 2019 following the introduction of Bakkt last September. While the platform is designed as a crypto trading platform for institutional traders, it failed to make any serious headway when first brought to fruition. As a result, the system traded less than 75 total contracts prior to the close of its opening weekend, and bitcoin’s price took a nasty hit, falling from roughly $9,500 to about $8,100 in a matter of minutes.
From there, however, Bakkt ultimately picked up and saw itself breaking records to trade more than $2 million in BTC-based contracts. The platform has since expanded to allow shoppers to purchase items like Starbucks drinks with digital currency.
Demirors lists her second reason in a follow-up tweet, claiming:
A topic that’s been studied in other commodities markets is how pricing is set. Bitcoin is, arguably, a digital commodity. Normally, producers set the price of a commodity (classic S = D = P from Econ 101) when derivatives take off, producers lose the right to set prices.
More Interest in Crypto Products Than Actual Crypto
Following this statement, she explains:
There is a new market developing for bitcoin – one driven by speculative trading and enabled by derivatives… The more bitcoin becomes an investable asset, the more its price becomes decoupled from its value and its supply and demand. It becomes yet another backwater in the great game of global speculation. It becomes ‘financialized.’ It becomes correlated to macro markets.
A halving is when mining rewards for a specific cryptocurrency are reduced. Thus, in May, bitcoin miners will receive considerably smaller bitcoin rewards than what they’re presently earning. This will inherently make bitcoin rarer, which is why some still believe the halving could positively affect BTC’s price next year.