Story by: Charles Bovaird
As bitcoin’s next halving approaches, many investors have been closely monitoring the markets.
Countless analysts have cited the digital currency’s halvings, which reduce the rate at which new supply is created by 50%, as helping fuel gains in the cryptocurrency’s price.
While bitcoin’s first two halvings took place in 2012 and 2016, the next one is scheduled to take place in May, and traders, market observers and investors have already begun evaluating its impact.
[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
Digital Assets Data, a financial technology and digital currency intelligence company, offered some figures on how bitcoin prices have behaved surrounding these events.
The 2012 halving coincided with a more than 2,000% rise in the digital currency, which climbed from roughly $5 six months before the event to approximately $126 six months after, according to Digital Assets Data.
The chart below helps illustrate this situation:
Bitcoin prices experienced a less extreme reaction to the second halving, roughly doubling during the same time frame.
Between six months before the event and six months after, the digital currency’s price climbed from less than $450 to more than $950.
The chart below helps show these developments:
In the six-month period leading up to the next halving, bitcoin has been pushing higher, rising more than 35% year to date (YTD), additional Digital Assets Data figures reveal.
Looking at this information, the volatility leading up to the next halving is significantly lower than it was for the 2016 event, which in turn was less than that of the 2012 halving.
This gradual reduction in volatility can be interpreted as showing that the overall market for bitcoin has been growing more stable.
A wide range of factors have contributed to this improvement, noted analysts.
“Over the years” “the market has become more stable due to increased liquidity, varied global participation, regulatory developments and institutional involvement,” said Joe DiPasquale, CEO of cryptocurrency hedge fund manager BitBull Capital.
Independent cryptocurrency analyst David Martin also weighed in, stating that “as assets mature, there are more market participants and the markets become more efficient.”
“A comparison can be shown by looking at Amazon,” he stated.
“Once upon a time, Amazon was a small, risky tech startup and regularly had volatility that rivaled bitcoins elevated range,” said Martin.
“As the company became more mature, volatility generally decreased gradually.”
“As bitcoin becomes more mature, and the market surrounding bitcoin offers liquidity options like derivatives, volatility should follow a downward sloping trend line.”
Kiana Danial, CEO of Invest Diva, made some additional points, emphasizing that the knowledge of investors, regulatory framework and financial infrastructure have all improved significantly after the crypto bubble burst.
“On top of that, we have more historical data in our hands to analyze the markets with better accuracy and to create better investment strategies,” she stated.
“These have all helped with the reduction of the hype and FOMO-based trading and the volatility we saw when the industry was still very young.”by