If we want to be exact, according to the countdown, Bitcoin halving is coming in 25 days. Before the COVID-19 pandemic, the whole cryptocurrency space was optimistic. Especially after the latest surge towards $10,500. Nevertheless, much has changed since then. Therefore, we shall go deep into the fundamentals and technical aspects to see what can investors expect until the end of 2020.
To better describe what this heading means, we will present you with a historical chart of the situation before the first two halvings.
The obvious thing is that going into both past halvings, Bitcoin was bullish. Not only that, but BTC was on the way up for quite some time before halvings. Both times, Bitcoin exploded after the mining reward halving and in a year's time, reached a new all-time-high (ATH). After the first halving, $1,000, and after the second, $20,000.
This time, however, the situation is much different.
While we draw near to 2020 Bitcoin mining reward halving, the biggest cryptocurrency in the market is clearly bearish. This negative market sentiment was confirmed just a few days ago when our technical analysts spotted the rising wedge formation. Naturally, the rising wedge is bad news for all who HODL. Bitcoin simply hit the hard resistance at $7,400 and bounced down below $7,000 again.
What we desribed last is a short-term bearish movement. However, to paint a better picture, we shall take out a long-term BTC/USD chart.
The chart above shows that, since June 2019, Bitcoin has done nothing but decline. The lower lows clearly follow a single trend line, marking a completely negative market sentiment.
The thin vertical line is the halving moment. Looking at things from this perspective, it is difficult to imagine that the sentiment is going to change in such a short period.
The first and the most obvious reason for the all-encompassing pessimism among investors is the COVID-19 pandemic. In fact, not the pandemic itself but the reaction of world leaders to the new virus.
What do we mean by that?
Well, the answer is quite simple. Most countries in the world chose the strictest policy in battling coronavirus. The lockdown used to "flatten the curve" of the newly infected seriously endangered the global economy, and investors are more than aware of this fact.
So, what do people do when the global economy is about to collapse?
They simply cash out on all their investments and try to survive with what they have left. The calculation is simple and the monologue goes something like this:
OK, there might be a shortage of provisions necessary for me to survive.
Why do I think that?
Well, because the world's economy just stopped in a matter of days. Therefore, I have to have cash.
Why cash?
Well, because with cash I can buy everything everywhere. If crypto would be widely accepted, I would hold crypto but since it isn't so, I'm taking everything out.
Thus, there is no new money coming into the market. Analogically, the price can't recuperate and it simply slips further down the bearish stream.
A big portion of cryptocurrency enthusiasts believed that crypto is a keeper in case of the global financial crisis. Nevertheless, clearly, those believers are currently being proved wrong. Just like we discussed in the article published on February 27th, the structure of those who invest in cryptocurrencies has drastically changed after the last Bitcoin halving. It seems that those who believe in Bitcoin as a safe haven are much fewer than those who invested for a quick buck possibility without understanding the true nature of crypto.
Nevertheless, fundamental reasons might not be what's troubling Bitcoin at the moment. In a highly unpopular technical analysis published on CoinSyncom at the time when Bitcoin looked great above $10,000, the current scenario was foreseen. According to the piece, it is completely normal that Bitcoin plummeted towards $4,000 and even below.
Taking that into account, Bitcoin should bounce off this bottom to form a descending triangle. If you are thinking that descending triangles are only bearish formations, you would be very wrong.
According to Thomas Bulkowsky, a well-known investor, descending triangles, if the price breaks out northwards, can be particularly bullish. Now, let's take that back to our current situation.
If Bitcoin manages to rally from $4,000, te descending triangle would be complete with three equal lows and three lower highs. In this scenario, the next time Bitcoin reaches the lower high would be crucial. Not only because it would happen after the halving but also because Bitcoin would have more time to accumulate after the COVID-19 crisis eventually passes. Therefore, the depressive chart you've seen above could also look something like this:
But just when you think that we base our opinion on simple technical indicators alone, there is something additional that everyone has to account for.
Now, let's go back to the very beginning of this article and see how Bitcoin behaved after each of the halvings. The first time that Bitcoin's mining reward was cut down by 50%, it took BTC less than a year to reach a new ATH. Moreover, it never produced a new major spike in the year of the halving. Furthermore, after 2016 halving it took Bitcoin nearly a year and a half to finally get to $20,000.
Looking at things from that perspective, it is clear that there is still enough room for some serious amount of optimism. Because, if Bitcoin manages to remain above the $3,000 historical support, it has a good chance to start the accumulation. This time, it might just take Bitcoin closer to two years to reach the new ATH. Therefore, what we could see is a very bullish 2021. And that, you have to admit, is a comforting thought.
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