5 things to know before the Bitcoin halving

Bitcoin (BTC) commences the new week, facing an uphill battle to recover from a 15% price decline, with the ticker wavering at around $62,000. Following a weekend of significant losses across the crypto sphere, traders are recovering from the aftermath, although Bitcoin itself is showing signs of resilience.

Geopolitical developments are under close scrutiny by investors this week, with parallels drawn between recent events in the Middle East and the cross-market crash triggered by COVID-19 in March 2020. Altcoins have borne the brunt of the market's abrupt reaction to tensions between Israel and Iran, while BTC/USD has managed to maintain support above $60,000. However, leverage saw a substantial reduction, with 30% of open interest vanishing instantly, even in Bitcoin markets.

Looking ahead, volatility remains conspicuous, especially as Bitcoin edges closer to its next block subsidy halving, setting the stage for ongoing tumultuous conditions in BTC's price dynamics.

Bitcoin halving scheduled for Friday

Although the countdown to Bitcoin's block subsidy halving cannot be predicted with pinpoint accuracy to the minute, the current estimation is that it will take place this Friday, 19 April. Expect this period to be marked by market volatility, with miners preparing for revenue adjustments as new Bitcoins per mined block decrease by 50% to 3.125 BTC. As a result, stocks in Bitcoin mining companies such as Marathon Digital (MARA) and Riot Platforms (RIOT) have recently suffered, but analysts remain optimistic. Mitchell Askew, head analyst at Bitcoin mining firm Blockware Solutions, recently made a statement calling investor fears "mostly unsubstantiated" and predicting that the halving will be a "buy the news event".

While miners are expected to increase selling pressure around the event, on-chain data suggests a stable BTC balance in known miner wallets, a sign of confidence in Bitcoin's value as miners keep some in reserve for themselves.

Bitcoin bulls quick to rebound after $61,000 crash

This past weekend unfolded with turbulence in the crypto market that reflected fresh turmoil and geopolitical unrest in the Middle East. BTC/USD plunged to just above $61,000 amidst swift sell-offs reminiscent of what happened during events in Ukraine in 2022.

Altcoins faced even steeper declines, with some shedding 50% of their value before gradually recovering alongside Bitcoin. The original cryptocurrency continues to be the undisputed leader of the pack, with BTC's dominance over the total crypto market cap recently reaching three-year highs.

While the magnitude of the market movements caught many off guard, this type of correction can be a sign of market health as over-leveraged positions are sold off. Significant liquidation events in derivatives markets often signal a bottom for asset prices, eliminating excessive leverage and purging the market of overconfidence. The recent liquidation waves resulted in the elimination of over $1.5 billion in bullish positions on Friday and Saturday combined, purging the market of weaker hands.

These events echo similar occurrences in August 2023, when Bitcoin plummeted from $28,000 to around $24,000, resulting in nearly $1 billion in liquidations across all digital assets. Following this substantial decline, prices remained relatively stagnant for almost two months until October's breakout above $30,000, leading to significant price increases.

This current pullback, with Bitcoin retracting 16% from its recent all-time high in March, aligns with typical corrections observed in previous bull markets. Similar pullbacks of 20%-30% were witnessed during the 2016-2017 and 2020-2021 bull cycles.

Despite prevailing apprehensions, hedge fund QCP Capital revealed on Tuesday that it continues to observe steady, substantial demand for BTC and ETH calls, with longer-term expiries extending to March 2025. This suggests that market participants still expect further price increases following the halving.

Popular crypto trading influencer Skew noted on social media that it is "Very crucial to remain above $62K for any chance to see a considerable bounce", and at the time of writing on 17 April, Bitcoin appeared to be holding the line, even climbing slightly from its position at $63,000.

Macro conditions: Middle East conflict, United States economy 

The forthcoming week brings a mix of macroeconomic data from the United States and statements from senior Federal Reserve officials, including Chair Jerome Powell. Against the backdrop of Middle East tensions, risk assets are poised for heightened sensitivity. Market reaction to geopolitical tensions over the weekend will be closely watched, particularly with key data releases such as unemployment data claims and Powell's speech on the agenda.

Inflation remains a pivotal concern for traders, who have adjusted expectations for interest rate cuts amid fiscal spending dynamics. The recent five-day surge in the value of the United States dollar, marking its strongest performance since February 2023, contrasts with Bitcoin's recent decline. This shift is attributed to expectations of prolonged high interest rates and increased volatility ahead of Bitcoin's halving on 20 April. The dollar's appreciation is fueled by forecasts of sustained interest rate hikes, encouraging foreign investment in US bonds and term deposits. Conversely, Bitcoin has experienced a 9% drop in price over the same period, illustrating the historical inverse relationship between the two assets.

Hong Kong approves spot Bitcoin and Ether ETFs amid US slowdown

Despite the weekend's volatility, Hong Kong regulators have reportedly greenlit spot Bitcoin and Ether ETFs, signalling the potential for increased Chinese involvement in crypto markets. Market participants view this development optimistically, anticipating broader accessibility to crypto assets for Chinese investors.

While US ETFs experience a slowdown in inflows following March's rapid ascent alongside BTC price highs, they remain among the most successful ETF launches in history and a significant factor behind Bitcoin's all-time highs earlier this month. The potential impact of Chinese investment in Hong Kong's ETFs has yet to be seen, although the initial impression is muted, with Bitcoin remaining under $70,000 since the reveal.

Crypto sentiment remains greedy

Despite the recent market turmoil, sentiment remains predominantly "greedy," as indicated by the Crypto Fear and Greed Index, signalling investors' persistent optimism.

While fear and greed briefly dipped, they quickly rebounded back to the "greed" zone, underscoring ongoing bullish sentiment. Market observers remain divided on BTC/USD's trajectory leading up to the halving, with a slight majority anticipating a return to $70,000 by the weekend.

Get the best conditions on Bitcoin trading with StormGain

Despite the volatility surrounding the halving event, the underlying sentiment on Bitcoin remains bullish, and traders are preparing to exploit the increased value of crypto assets that are predicted to follow the reduction in Bitcoin supply. 

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