Bitcoin breaks below the $4000 down mark, dragging the cryptocurrency market along with it. The total market capitalization of cryptocurrency markets also broke below the $140 billion mark.
The price of BTC at 5: 00 hours UTC on 26th March is $3965. It is trading 1.5% lower on the daily scale. Bitcoin has built strong support near $3850, a break from that could revive the bears of 2018.
Bitcoin Halving To Affect the Price?
The traders seem to be sending mixed signals. The ‘halving of Bitcoin,’ an event that will reduce the mining rewards by half occurs every four years. It was designed by Satoshi Nakamoto in such a miner to induce deflation in the system. As the mining reward is reduced to half, it is expected that the price of Bitcoin must increase to maintain parity between demand and supply.
Bitcoin halving event has occurred twice since 2009; First in Nov 2012 and the second in July 2016. The original miner reward was set at 50 BTC. The reward for mining a block currently is 12.5 BTC. The estimated halving date this time is 23 May 2020 post which the reward for mining a block will be reduced to 6.25.
Nevertheless, the price of Bitcoin during the second halving was $677. The price of Bitcoin is currently $3965. Hence, it has already risen five times its value since the previous halving but the difficulty has also increased considerably. We’re almost a year away from halving, and the miners are already at the brink of making a loss. Hence, to create a sustainable system, the price must compensate for the reduction in miner rewards.
The RSI Indicator
The RSI indicator is a momentum oscillator; The signal primarily oscillates between 70 (Over-bought) and 30 (Over-Sold). Bitcoin (RSI – 50) is currently neither in the over-bought region not in the over-sold territory. However, the long term RSI history of Bitcoin suggests that the bottoming is still a possibility.
If cue from history and Bitcoin is assumed to be in the accumulation zone, the RSI index during this period is expected to be towards the over-sold region before the beginning of a bull-season. Hence, assuming a long term bullish action, the price might see a further downtrend before towards over-sold region before the bull action really starts to take control.
The long term optimism around Bitcoin deters the HODLER’s from changing their position. Moreover, the Hodling strategy has more often than not yielded stable returns. While the price seems to continues to consolidate around the $3900-$4000, the sideways action on Bitcoin could move either way.
Nivesh from Engineering Background is a full-time Crypto Journalist at Coingape. He is an atheist who believes in love and cultural diversity. He believes that Cryptocurrency is a necessity to deter corruption. He holds small amounts of cryptocurrencies. Faith and fear are two sides of the same coin. Follow him on Twitter at @nivishoes or mail him at nivesh(at)coingape.com