Bitcoin mining giants are also looking to increase their operational efficiency with improved chipset hardware that delivers more hash power per watts of electricity. However, some pundits predict the reduced block reward subsidies will negatively impact the bottom-line of smaller operators forcing them to exit the market.
Bitcoin Hodling Moons as Halving Nears
This trend represents an all-time high for daily BTC hodling signaling an increasing investor appetite for the top-ranked cryptocurrency, especially with the upcoming halving event.
#Bitcoin HODLer Net Position Change has been growing daily since the end of March and is now hitting yearly highs.
— glassnode (@glassnode) April 22, 2020
This particular metric — Hodler net position — has been known to indicate the direction of long-term investors during bullish and bearish cycles.
In bull markets, when the Bitcoin price continues on a significant upward trajectory, the metric has shown massive cashing out while in bear markets, there has been a race to ‘buy the dip,’ in the expectation of another future positive price performance.
The Hodler net position indicating massive BTC accumulation is the latest indication of Bitcoin owners electing to hold the crypto in the expectation of significant gains after the May 2020 halving. Bitcoin’s two other halvings have been a precursor to the BTC price reaching a new all-time high.
Crypto exchanges are also seeing massive withdrawals as BTC holders appear to want to keep their Bitcoin stash in their wallets. After the halving, the supply inflation drops 3.72% to 1.79% causing the daily supply of Bitcoin to reduce by half from 1,800 BTC to 900 BTC.
With such largescale hodling, the supply shock created by the reduction in block subsidies will make supply far outstrip demand thereby triggering a significant price increase for Bitcoin.
Bitcoin is currently mounting another assault at staying above the $7,000 price mark. Previous attempts have seen the top-ranked crypto being rejected between the $7,100 and $7,500 resistance zones.
The current BTC price struggle appears to be follow-through from the events of “Black Thursday” (March 12, 2020) when Bitcoin fell to $3,800 — a day marked by panic selling in the broader financial markets as well.
Halving Could Cause Miners to Exit the Market
With the halving set to happen in May, mining giants like Bitmain and MicroBT are acquiring more sophisticated hardware to account for the supply shortfall that will follow the event. These upgrades reportedly boast greater efficiency in terms of reduced energy requirement and faster computational capacity.
While mining behemoths like Bitmain can afford to upscale their hardware, smaller mining pools may be forced to exit the market once the block reward drops from 12.5 BTC to 6.25 BTC. The reduced network output due to the inflation drop may see these smaller miners unable to breakeven.
Meanwhile, the current trends in network fundamentals see the Bitcoin hash rate recovering from its late March slump. At the time, the Bitcoin hash rate fell by more than 45% as some miners exited the blockchain following the flash crash of the previous fortnight.
This hash rate plunge led to the second-largest downward difficulty adjustment for Bitcoin as the mining difficulty dropped about 16%.
However, the current Bitcoin hash rate has almost erased the drop especially following the influx of nodes from the Bitcoin Cash (BCH) and Bitcoin SV (BSV) chains. Both BCH and BSV saw their halvings happen more than a month before BTC’s, forcing some miners to move their hashing power to the Bitcoin Chain.