Thriller Insights - S3EP23: Post Bitcoin Halving Analysis

  
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On May 11th, the block reward in the Bitcoin network was decreased from 12.5 to 6.25 BTC heralding the 3rd halving in Bitcoin history.

Block #630000, was the first to bring a decreased reward, and it was mined by the AntPool mining pool group.

On Chain Metrics

The number of active addresses (and entities) has increased to levels not seen since the 2017 bull market - as has the number of new addresses - suggesting an increase not just in activity, but also in adoption.

Not only are we seeing increased on-chain activity from new adopters, but also from longer-term investors; specifically, hodlers and whales.

Miners

No surprise that ASIC chip manufacturers have caught up to the cutting edge. Miners now have the smallest & most efficient nanometer chip architecture. This is interesting because in the past, if you purchased a miner, by the time it was shipped to you, there would be a better generation making yours almost obsolete. (ahem Bitmain) Now that miners have caught up to mainstream generalized chip fabrication, when you buy a mining rig, you know that there will not be one 2x as fast next month. This enables more predictability and the costs of miners will come down thanks to mass production. Miners will mine and hold, speculating, and covering power costs until they are forced to sell. The mining industry is simply going to look for cheaper & greener electricity like geothermal, hydroelectric, as well as to use up excess power that power-plants where going to the waste in the first place.

Bitcoin Hash Rate as of Today.

The hashrate will fall that is for certain. Most have made the move back to BCH and BSV. Also the weakest miners will have to shut down unless we see a huge increase in the price, around 15–30% will shut off. Now some miners will turn on again after the first difficulty adjustment takes place. The older machines will eventually shut off as new, many old mining machines, especially S9, will fade away from the market, better machines will come online (some mining farms may have access to free electricity, so they could still run S9.) These new machines will push the difficulty rate higher which will make older machines with less hash-power unprofitable. I foresee this happening in a span from June, July and part of August.

Bullish Factors after the halving

  • Facebook Calibra launch in October

  • Ethereum 2.0 Launch in 3rd Quarter.

  • Bakkt Phase 2 Roll-out sometime this summer.

  • China’s Digital Yuan release rolling out now and the rest of the year.

  • CBDC’s set to release to the public at some point in 2021. Possible Cryptocurrency Act as well.

  • More Stimulus Checks? Later this summer.

  • More Fed printing….brrr

  • Bitcoin Upgrades; BIP 340 Schnorr Signatures, BIP 341 Taproot, BIP 342 Tapscript, Stratum V2 —all possible for implementation in 2021.

Bitcoin

Events impacting Bitcoin 2020 — the halving, proving itself as a safe haven asset, quantitative easing, businesses emerging from the crisis, regulation changes and technical upgrades — all individually have the potential to change its path forever, but all combined at once & no one is going to want to look away.

This time, the price may be growing faster, since more people consider Bitcoin as a safe haven asset because of the crisis. There are chances we will never see prices like in the middle of March ever again. History is telling us that the Bitcoin price will typically begin to rise significantly within the 12 months following a halving — I think we will see the real rally in 2021. Now, Bitcoin is a full-fledged asset used by Wall Street companies and I think it’s ready to establish itself in some way.

One potential framework for analyzing the impact of halvings is to study the change in the stock-to-flow ratio across each halving. The first halving reduced the supply by 15% of the total outstanding bitcoins. That’s a huge impact on supply and it had a huge impact on price.

Each subsequent halving’s impact on price will likely taper off in importance as the ratio of reduction in supply from previous halvings to the next decreases. Below is a chart depicting past halvings’ supply reductions as a percentage of the outstanding bitcoin at the time of the halving.

The second having decreased supply only one-third as much as the first. Very interestingly, it had exactly one-third the price impact.

Extrapolating this relationship to 2020:

The reduction is supply is only 40% as great as in 2016. If this relationship holds, that would imply about 40% as much price impulse — bitcoin would peak at $115,212 /BTC.

“History doesn’t repeat, but it often rhymes.”
- Mark Twain

Part 1: Long term bullish trend

However this new target doesn't come without terms, there are very certain trend-lines we need to pay attention to such as the 10500 Resistance. This level has been holding since early September 2019 and has already rejected break-out attempts twice (October 26 2019 and February 13 2020). It is therefore no surprise that BTC has been struggling around the 10000 mark for two weeks now.

While this 10500 flat Resistance has been holding for that long, at the same time the RSI has been showing strength, being under a bullish divergence on Higher Highs and Higher Lows. That is of course excluding the collapse of early March which was non-technical, fueled by the stock market crash. This bullish RSI is an underlying bullish signal that should ultimately result in breaking the 10500 Resistance.

All the above parameters show that BTCUSD is well supported on the long-term on a "Cup within Cup pattern" which is forming the right side of the formation. This is likely to charge the break-out above $10500, which will give way to the $13800 annual high of 2019. This process requires our patience and careful buying of potential pull-backs towards the curves or adding on the Resistance break-out. Investing on Bitcoin is a marathon not a sprint and as long as we keep that in mind we will again end up with at least 10X our investment at the end of the current Cycle.


Part 2: Mid term bearish trend

June and July will be very bearish months but we must maintain $7.8K or a further drop to $5.8K becomes a possibility. Make certain to look at these dips as an opportunity to get in at a target price we likely will never see again for Bitcoin. This is in fact a reality after October 2020.

Part 3: Short term bullish

Following Sunday's selling, BTC has more than recovered that drop within the week but we see the price today pulling a little back again. This pull-back stopped BTC from extending the Higher Highs sequence it started after the mid-March collapse and instead we are now sitting on Lower Highs. This Lower Highs trend-line must be avoided at all costs and I will explain why.

Last time Bitcoin printed a similar Lower Highs sequence was it mid February when we all remember that it was the beginning of the fall. If this is not avoided and Higher Highs are not made we can have a similar sell-off (not as strong as March's though unless COVID causes another flash crash on the stock markets) back to the 1D MA200 or even lower to the Symmetrical Support. We are close to printing a Golden Cross (MA50 crossing over the MA200) which is theoretically a bullish formation but as seen on the Lower Highs sequence of mid February it was actually bearish as it was formed at the top.

The LMACD, our very accurate technical indicator throughout the previous years, may actually save the day. I will explain why. As seen on the chart, the LMACD made a bearish cross on Sunday's drop but with this week's recovery, is close to printing a bullish cross now. The very same cross sequence was seen in late January when Lower Highs were again formed on the price candles (though not as strong as the current ones) but the LMACD made successive crosses ( bearish to bullish ) and the uptrend was extended making Higher Highs all the way to mid-February's High.

So where do you think we are? At the top of the April rally or roughly in the middle as the LMACD may suggest? Whatever the speculation one thing is for sure. BTC must break the current Lower Highs trend-line to avoid a sell-off taking place.

Citations:
Glassnode Delphi Digital Pantera Capital TradingShot

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