Moment of Truth as Bitcoin Price Breaches Key Resistance with Halving Only Days Away
The Bitcoin (BTC) price surged to $9,500 as the top-ranked cryptocurrency rallied 50 percent in April alone with the block reward halving less than a fortnight away. Some crypto pundits are advising caution, warning of a possible drawdown given the lack of liquidity in the market.
Bitcoin Price Gains $1,700 in 24-hour Surge
Bitcoin has dominated the crypto headlines over the past 24-hour period as it reclaimed the $9,000-price mark for the first time since early March 2020. In all, the Bitcoin price surged more than $1,700 blowing past multiple resistance levels on the back of strong bullish momentum.
Quoting from the analysis provided by Stack — a Bitcoin index fund based in Singapore, Forbes reported:
“Bitcoin is now trading at a critical inflexion point, where significant Fibonacci retracements, 50-day moving averages and 10-day moving averages converge on the daily chart.”
Given the recoveries in the broader financial markets, BTC bulls could be hopeful for a continuation of the positive price trajectory. Stock markets in the U.S. closed on a high on Wednesday (April 29, 2020) with Bloomberg reporting similar gains for Asian shares and the U.S. futures market.
The current Bitcoin price rally is amid growing anticipation for the upcoming halving which will see block reward subsidies cut in half. As previously reported BTCManager, retail BTC purchase has been on the increase since February 2020.
In an email to BTCManager, Joe DiPasquale, CEO of crypto hedge fund BitBull Capital, remarked:
“In the long term, reward halving is a bullish development, especially as fiat currencies around the world are experiencing inflation, and Bitcoin’s supply reduction results in deflation. In terms of immediate effects, mining Bitcoin will become less profitable, and some smaller miners may shift to other coins, leaving larger pools behind. Some market participants are also expected to ‘sell the news’ at the time of the halving, resulting in an immediate price dip.”
Liquidity Crunch Could See Sharp Price Retrace
While bullish sentiments prevail, historical precedence shows Bitcoin price performing poorly after a 24-hour $1,000 price gain. According to a tweet by Timothy Peterson of Cane Island Advisors, the BTC price trajectory after every 24-hour $1,000 green candle is negative with the average downward slide reaching 38 percent over the next 90 days.
However, the unique circumstances that accompany the present situation might cause the current rally to not be archetypical. With central banks entering QE (quantitative easing) overdrive and the COVID-19 pandemic causing economic shutdowns, Bitcoin and the crypto market could benefit from a wave of fresh enthusiasm.
Bitcoin could face a liquidity crunch in the short-term leading to another price retrace similar to “Black Thursday” (March 12, 2020). With the halving reducing block rewards by 50 percent, the BTC daily supply will decline by half causing a supply shock.
Amid the supply shock, smaller miners may exit the network, liquidating their Bitcoin stash which could trigger an avalanche of selling pressure on the BTC price. Though likely temporary, the short-term implication could see the Bitcoin price lose some of its upward momentum.
All eyes will undoubtedly be on the top-ranked cryptocurrency to see how its price action plays out in May.