Where Will Bitcoin Prices Go Post-Halving?

In the aftermath of bitcoin's 'halving' on 9th July, market experts have begun to take positions on whether they believe the digital currency’s price will rise or fall in the weeks and months ahead.

Long a matter of discussion in bitcoin's trading community, market observers had been anticipating the event, which saw the number of new bitcoins issued per transaction block reduced from 25 BTC to 12.5 BTC, for years, and had been eager to see how it may affect both trading and the larger sentiments of investors.

Any anxieties have now been eased, as one week after the change, the halving has been seen by many a non-event in terms of price or overall impact on the network.

While the digital currency experienced, by bitcoin standards, a modest decline following the event (falling to $626.87 on 9th July, a figure that was 5.7% below the opening price), bitcoin prices have remained relatively stable.

Since then, prices have continued to build gains, rising to a press time total of $668.75, and going forward, many market observers suggest gains are likely to continue.

Gains ahead?

Market observer Joe Lee, co-founder and CIO of digital currency trading platform Magnr, for example, expects to see a "slow and steady" rise in the price to coincide with new confidence in the system.

"[The halving] represents a new level of maturity and stability in bitcoin’s blockchain," Lee told CoinDesk.

Lee said any gains are likely to be a reflection of new demand from those who were reluctant to invest before what was perceived to be a major event in the digital currency’s calendar.

Arthur Hayes, co-founder and CEO of leveraged bitcoin trading platform BitMEX, identified a separate source of potential bitcoin gains by pointing to new macroeconomic concerns.

While some observers said China and 'the Brexit' drove much of this activity, Hayes said he believes bitcoin could see upside market moves in the near future as a result of Bank of Japan (BOJ) monetary stimulus.

As the BOJ employs further monetary easing, a weaker yen could help fuel gains in bitcoin.

"The markets are focused on whether Japan will take Bernanke's advice and directly monetize Abe-san's proposed fiscal stimulus," he stated. "Should the BOJ embark down this path, it will flood the global markets with more free money."

Block debate

Bitcoin could also enjoy some upside based on what progress the community makes toward solving the block size debate.

Currently, each bitcoin transaction block has a maximum limit of 1 MB of data, a figure that a vocal component of the community has alleged is preventing or limiting wider consumer adoption.

Kong Gao, overseas marketing manager at bitcoin trader Richfund, weighed in on this highly visible issue, telling CoinDesk that it is not as big of a problem as some many believe.

He also emphasized his preference for focusing on block efficiency instead of size.

"Scaling up does not solve the problem, it's just kicking the can down the road," said Gao. "Making blocks more efficient is a better area we should direct our energy and discussions toward."

Lee also emphasized the key role the block size debate could play in the bitcoin community, and how it could create uncertainty for traders.

"Our eyes are on growth in underlying demand with the next major trading event being speculation around the uncertainty provided by the block size debate. With there being two clear camps, contention is inevitable," he said.

Long wagers

Another factor that could affect bitcoin prices going forward is speculative leveraged trading.

Petar Zivkovski, director of operations for bitcoin trading platform Whaleclub, spoke with CoinDesk about how market activity has cooled down a bit following the halving. Even so, speculative bets have been primarily bullish, he emphasized.

"Long-short positions seem to have stabilized around 72% in favor of longs, but most of those are residual longs from before the halving," he told CoinDesk on 14th June.

He continued:

"For a true mean reversion and ‘resolution’ of the halving event with respect to market dynamics, these residual longs would need to close, either through a long squeeze (sharp selling) or a pump enticing traders to close at a profit.”

While a short-term price increase may not be forthcoming, market observers said investors should keep in mind that bitcoin prices have enjoyed a steady, upward movement over time.

Market image via Shutterstock