Is Bitcoin’s Price Recovery Ahead of the Halving a Reason to Accumulate?

Colin Muller

April has been an exceptional month for Bitcoin (BTC) price action. The leading cryptoasset is currently in the throes of its second huge breakout of the month. Speculation abounds that the crypto bear market, which started in 2018, is definitively at an end. The time has come, perhaps, to ask the question: Is it time to accumulate Bitcoin?

Regarding the question of whether or not to accumulate BTC, we can highlight two important price action events — one that has just occurred and one that has not yet come. These are the so-called “Golden Cross,” and Bitcoin’s expected halving which should occur in mid-2020. Both of these suggest — cautiously — that it is safe to resume buying Bitcoin for the long term.

The Halving

Bitcoin's “halving” event occurs when the mining reward is cut in half, in other words, Bitcoin’s inflation halves. Occurring about every four years, the upcoming event will be Bitcoin’s third halving, and is projected to occur in mid-2020.

The halving has historically been a big deal for Bitcoin traders and investors, as the two halvings to date have been preceded by a bear market and occurred during or after a market reversal.

The simple value proposition of a halving is that, with decreased supply of Bitcoin, similar or greater demand for the cryptocurrency will see the price rise. Miners will get half as much Bitcoin for their efforts to secure the network and it is thought that to compensate for this, Bitcoin’s price will rise.

We take a look at the focus on the timing of the halving and how that interacts with the Bitcoin price. The timing of the two previous halvings with the turnover in market cycles could, frankly, just be a coincidence. The fact is the self-fulfilling expectation will probably continue to play a role in the price action leading to all future Bitcoin halvings.

This possible effect can be observed in the recent price action of Litecoin (LTC), a very similar and closely related cryptoasset to BTC, whose halving is quickly approaching. This upcoming event has possibly fueled significant gains for the beloved testbed companion to Bitcoin.

LTC’s halving is expected to occur in early August of this year. Consistently in the top 10 cryptos in terms of market capitalization, LTC has done better than most other large-cap cryptoassets since finding its lows, along with the rest of the market, in mid-December of 2018, putting in over 350% worth of gains.

Bitcoin's gains close to LTC's halving

The easy rebuttal to this observation is that Bitcoin Cash (BCH) has enjoyed similar gains since December, and doesn’t have a halving event until next year, along with Bitcoin.

This is indeed true, but it is worth remembering also that BCH’s price fell by over 98% last year, whereas LTC’s price “only” fell by about 94% from its all-time high. This may not seem like much, but the deeper retrace for BCH on the way down matters more coming back up, and a deeper retrace would suit a more dramatic price rebound.

At any rate, we should continue to monitor litecoin’s behavior during its halving event, to get an idea of what we can expect Bitcoin to do in a year.

Getting back to Bitcoin, one analysis that supports the prediction that the halving will occur during a bull market is research conducted by Delphi Digital on UTXO ages. Delphi analyzed the historical trend of accumulation through these UTXO ages, with the growing age representing HODLing. It found that peak UTXO ages have always come around the time of the halving.

Delphi's study

Indeed, just looking at a Bitcoin chart from the previous halving, we can see that it occurred in the midst of a giant uptrend.

Bitcoin's performance during the last halving

The Golden Cross

We might also look at the famed Golden Cross (hereafter “cross”), which has only occurred with Bitcoin’s recent rally. A cross occurs when a short, uptrending moving average (MA) crosses a longer downtrending or flat MA.

The cross is commonly considered a bullish event, signaling an overall uptrend in an asset. and even a general trend reversal. It is also commonly measured as the intersection of the 50-day and the 200-day MAs. Yesterday’s cross can be seen below.

Bitcoin's Golden Cross

Indeed, with the cross achieved, it seems harder and harder to make the bearish case that Bitcoin could retest, or break its yearly lows.

But as covered in CryptoGlobe’s recent price analysis, it has happened before. During the previous Bitcoin bear market of 2014-2015, a cross occurred near Bitcoin’s market bottom, and the accumulation area instantly reversed its course almost as soon as it was achieved.

Bitcoin bottom reversal in 2015

Then the breakout, which occurred just before the cross, quickly proved to be a fakeout. In just over a month, the price collapsed to retest the market’s lows—and held. The golden cross turned into a death cross, which quickly turned back into another golden cross as the Bitcoin price recovered. From there, Bitcoin began a years-long bull run that concluded in 2018.

There are some obvious lessons here. Crosses, bullish or bearish, do not set in stone the direction of the traded asset. They are indicators, suggestions, theories, and not facts. The April rally could still roll over to retest December’s lows, just like in 2015.

This isn’t to say that this month’s rally resembles the 2015 bear market. Bitcoin’s breakout from $4,200, and its enduring strength following the move appear to have more momentum to them than any price action during the 2015 bear market cycle.

Now that the cross has occurred, we must be very vigilant of the rally’s sustainability. This second April breakout should at the very least achieve a price of $5,800 before a correction. A correction will more than likely come, of course. And depending on how good Bitcoin looks now and in the coming days or weeks, investors could consider accumulating more BTC between $5,000-$4,000.

Time to Accumulate Bitcoin?

Between the upcoming halving, the Golden Cross, and Bitcoin’s very promising behavior in April, the Bitcoin water is looking more and more appealing to wade into.

It will be critical to see, in the coming days and weeks, how far Bitcoin retraces or corrects from its incredible showing so far in April. A correction anywhere above $4,200, the level of the initial April 2 breakout — now so important to Bitcoin’s market structure — seems like sufficient strength to consider accumulating Bitcoin.

Bitfinex Wants to Offer 100x Leverage For Crypto Derivatives Trading

Michael LaVere
  • Bitfinex will offer 100x leverage trading for cryptocurrency derivatives
  • According to the exchange's CTO, the hedging product is "ready for prime time"

Cryptocurrency exchange Bitfinex revealed it wants to offer derivatives products with up to 100x leverage for cryptocurrency traders. 

Hedging On Cryptocurrency Derivatives

Chief Technology Officer Paolo Ardoino told The Block on June 25 that the cryptocurrency exchange was ready to ship a 100x leverage product for certain users. According to the post, the project has been under development for some time and is “now ready for prime time.” 

The product was referenced in last month’s whitepaper published by Bitfinex for its $1 billion private token sale of LEO, stating

“Qualified Bitfinex account holders will be able to trade a new hedging product through a derivatives wallet.”

The whitepaper originally claimed that the new hedging mechanism would be released by the end of June, a timetable that fits with Ardoino’s “ready for prime time” statement. 

Ardoino confirmed that only “verified” customers will be allowed access to the product, given the risks involved in such highly leveraged trades. 

The CTO also took to Twitter to quell user concerns over Bitfinex’s existing 3.3x margin trading. Ardoino explained 100x leverage will be “optional,” and that their current leveraged trading products will be unaffected by the release. 

Big Risk, Big Reward

Bitfinex is looking to compete with rival exchange BitMEX, who already offers 100x leverage through its bitcoin perpetual swap contract. However, Bitfinex claims its product is designed as a legitimate hedging tool for clients, rather than a gambling mechanism. 

Max Boonen, CEO of trading firm B2C2, believes the product will only appeal to retail hedgers, as large investors will shy away from the risks involved in 100x trading. 

According to Boonen, 

“There’s nothing wrong inherently about 100x. But as a commercial hedger you want lower leverage margin. The larger investor wouldn’t want to take the risk of 100X, typically. They don’t want to go balls to the wall.”

The cryptocurrency derivatives market has been heating up. Last week bitcoin-bull Mike Novogratz’s Galaxy Digital announced plans to offer cryptocurrency options contracts.

Binance has also reportedly been exploring futures trading. On June 24, Binance CEO Changpeng Zhao tweeted the exchange had executed its first margin liquidation for a BTC short.