Bitcoin: USD/BTC (BTC=X) Massive volatility ahead of halving
Bitcoin halving, as it’s called, is set to take place for the third time on or around May 12. In the past, this event has coincided with a strong run-up in the bitcoin price and may lead to pre- and post-halving volatility, with price implications extending into 2020 and beyond.
The 2020 halving event has several additional factors than previous such events including the availability of CME Bitcoin futures and options, which investors and miners can use to hedge or express views on the bitcoin price. This changes the narrative around the halving for three key reasons: it enables price risks to be hedged, demand risk for bitcoin can be managed and speculators can look to the indicators of options pricing.
Shayne Heffernan Trade Idea
“I believe the economic fallout from the coronavirus outbreak could be one major obstacle to bitcoin’s bull run after the “halving”.
“The force of bitcoin’s prime marketing event is colliding with the opposing force of an incredibly uncertain macroeconomic environment that continues to be an overhang on every asset class.” Shayne Heffernan PhD in Economics
Why This Matters
New units of bitcoin are created through mining. Mining is the process of confirming transactions, combining them into blocks and adding them to the blockchain. As a reward, and to keep miners incentivized, every time a block is completed, the miner responsible for creating that block receives a reward in the form of new bitcoin. Miners compete with each other to earn newly-issued tokens known as the block reward.
The bitcoin protocol was programmed with several rules; a cap on the total supply of bitcoin of 21 million and a planned reduction in the block rewards miners receive. Currently a new block of bitcoin transactions is solved by miners and added to the blockchain approximately every 10 minutes. Halvings happen once every four years – or more precisely, at every 210,000 blocks of transactions. The next one will happen at block 630,000; on or around May 12, 2020.
With this program of diminishing returns, miners reap fewer bitcoins with each halving. Initially, in 2009, winning miners were rewarded with 50 bitcoin per block. That halved in November 2012 to 25, and again in July 2016 to 12.5 bitcoin per block. The third halving will see the network incentives or block rewards fall to 6.25 bitcoin.
In notional terms, given the bitcoin price of approximately $8,750 as of May 1, 2020, miners receive ~$110,000K for their 12.5 BTC. After the next halving, assuming the same price level, they will instead earn ~$55,000 giving them less of an incentive to mine blocks.
Overall, the bias in prices is: Upwards.
Note: this chart shows extraordinary price action to the upside.
By the way, prices are vulnerable to a correction towards 8,132.49.
The projected upper bound is: 9,794.58.
The projected lower bound is: 7,638.73.
The projected closing price is: 8,716.66.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 27 white candles and 23 black candles for a net of 4 white candles.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 38.1240. This is not an overbought or oversold reading. The last signal was a sell 1 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 53.07. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 2 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -52. This is not a topping or bottoming area. The last signal was a sell 1 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 0 period(s) ago.
Rex Takasugi – TD Profile
FOREX BTC= closed down -4.650 at 8,663.800. Volume was 63% below average (consolidating) and Bollinger Bands were 35% wider than normal.
Open High Low Close Volume 8,493.480 8,841.050 8,487.720 8,663.800 176,958
Technical Outlook Short Term: Neutral Intermediate Term: Bullish Long Term: Bullish
Moving Averages: 10-period 50-period 200-period Close: 9,222.73 7,514.82 8,048.12 Volatility: 113 86 87 Volume: 411,568 530,312 270,311
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
FOREX BTC= is currently 7.7% above its 200-period moving average and is in an upward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term.
Our volume indicators reflect moderate flows of volume into BTC= (mildly bullish). Our trend forecasting oscillators are currently bullish on BTC= and have had this outlook for the last 39 periods. our momentum oscillator has set a new 14-period low while the security price has not. This is a bearish divergence.
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