6 Reasons Bitcoin Price And Altcoins Could Crash After Halving: Experts - August 2024

The price of Bitcoin took a dive from its record-breaking peak, succumbing to the loss of momentum and dipping below key support zones at approximately $68,300 and $63,400. Predictions suggested that a drop below $60,000 was imminent for some consolidation before potential upward growth. Today, Bitcoin reached a low of $59,768. It’s been speculated that the Bitcoin halving could lead to a sudden shift in investor sentiment and instigate a significant surge in crypto markets.

1. Bitcoin Options Expiry

On Saturday, April 19, the estimated Bitcoin halving is scheduled to occur. Prior to this event, approximately $2 billion worth of Bitcoin and Ethereum options will expire on the preceding day, Friday.

Approximately 21,000 Bitcoins worth over $1.35 billion in total value from BTC options are approaching their expiration dates. The put-call ratio for these options is 0.64, and the max pain point, which represents the price at which these contracts will cause the least financial harm, is set at $66,000. Similarly, around 27,850 Ethereum options with a notional value of nearly $810 million are about to expire, featuring a put-call ratio of 0.49. The max pain point for these ETH options is priced at $3,150. As both BTC and ETH trade below their respective max pain points, the crypto market experiences heightened volatility.

On April 26, the crucial moment for the Bitcoin market arrives with over 88,000 BTC options, equivalent to a notional value of approximately $5.5 billion, set to expire. The put-call ratio stands at 0.66, implying that call options outnumber put options by a considerable margin. This disparity suggests that traders are more optimistic about Bitcoin’s price movement and anticipate it may trade above the current levels after its halving event. The max pain price for these options is $60,000, suggesting a higher probability of Bitcoin’s value dropping below this level post-halving.

Additionally, approximately 860,000 Ethereum options with a notional value of around $2.6 billion are set to expire. The put-call ratio stands at 0.51. This means that for every call option contract, there are slightly fewer put option contracts. The price at which these options will cause the least financial impact is $3,100. Consequently, the market is preparing for over $8 billion in Bitcoin and Ethereum option expirations.

6 Reasons Bitcoin Price And Altcoins Could Crash After Halving: Experts

The decline in open interests for Bitcoin and Ethereum reflects waning investor enthusiasm before their respective halvings, leading to decreased derivatives trading activity. Some speculators predict a potential surge to $100,000 for Bitcoin by September.

The funding rate for Bitcoin has been decreasing as the upcoming halving approaches, which is now just a few days away. This decrease in the funding rate suggests that traders have reduced their bullish bets, causing a less crowded market in the derivatives sector.
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2. Bitcoin Historical Pattern

Approaching the Bitcoin halving, we’ve seen a pattern in the crypto market: selloffs preceding the event, much like what happened during past Bitcoin halvings. A sudden spike in Bitcoin price to new record levels right away is unlikely; instead, it typically takes several months for such trends to play out fully.

Elja Boom, Forbes 40 Under 40, said Bitcoin tends to have a bearish Q2 and Q3 and believes the trend will continue this year. Also, a rise in the cost of mining BTC will cause miners to sell their holdings as mining reward gets halved to 3.125 BTC. He said, “I’m not bearish on BTC and crypto, but I wouldn’t mind a few months of sideways action after 7 consecutive months.”

Despite this, he anticipates a Bitcoin price of over $150,000 and Ethereum at more than $12,000. The prices of altcoins are expected to surge significantly due to increasing cryptocurrency acceptance.

6 Reasons Bitcoin Price And Altcoins Could Crash After Halving: Experts

3. Fed Rate Cut Delay and Macro Uncertainty

With rising inflation measures such as CPI, PPI, and PCE, a strong labor market, and the US economy’s ability to bounce back, the Federal Reserve has more flexibility to hold off on reducing interest rates. Jerome Powell, the Fed Chair, and Vice Chair Philip Jefferson have hinted at this possibility, with some analysts predicting as few as two rate cuts in 2023.

The stock and crypto market rallies were initially fueled by anticipation of Fed rate cuts in March, which later moved to May. However, recent inflation reports led the Fed to change its plans, pushing back the expected rate cuts to September. This unexpected change resulted in a reversal in both the stock and crypto markets. According to 10x Research CEO Markus Thielen, data from the Consumer Price Index (CPI) holds greater significance than the Bitcoin halving. The latest CPI reading came in at 3.5%, causing Bitcoin’s price to drop.

JPMorgan and other banks on Wall Street believe inflation will persist for several months. Meanwhile, analysts are forecasting that Bitcoin’s price could dip below $60,000, potentially reaching as low as $52,000. In a recent report from 10x Research, Markus Thielen stated, “The price increase might not occur right away, and the downward trend could extend to $60,000—or even $52,000.”

4. Iran-Israel Tensions

The clash between Iran and Israel led to approximately $500 billion in crypto asset sell-offs over the past few days. Consequently, the total value of the global cryptocurrency market plummeted from $2.64 trillion to a low of $2.21 trillion. The tensions have yet to ease as Israel’s war council convenes to discuss their response following Iran’s aerial assault.

The US dollar index (DXY), along with other macroeconomic factors, surged past 106 – its highest point since early November. Additionally, the US 10-year Treasury yield (US10Y) hit a peak of 4.622%, refusing to decrease any further. Conversely, Bitcoin responded by plummeting in value to $60k as its price moved in the opposite direction of both the DXY and the US10Y.

Kaiko announced that the correlation between Bitcoin (BTC) and the US Dollar index reached its lowest point in over a year, at -0.24, which is a significant decrease. This drop was caused by unexpectedly high US inflation figures and increasing geopolitical tensions.

6 Reasons Bitcoin Price And Altcoins Could Crash After Halving: Experts

5. BTC ETF Outflow

This week marked the fourth straight withdrawal for Bitcoin ETFs, totaling approximately $165 million on Wednesday alone. The recent decline in purchasing Bitcoin ETFs can be attributed to decreased institutional investment and the ongoing US tax season.

This week, the amount of money leaving Grayscale GBTC has indicated a decrease in flow. Contrarily, a significant increase in outflows from GBTC was observed on April 17, totaling $133.1 million compared to $79.4 million in the previous day. Similarly, Ark 21 Shares Bitcoin ETF (ARKB) experienced further redemptions, while Bitwise Bitcoin ETF (BITB) recorded its first-ever withdrawal of $7.3 million on April 17th.

6. Bank Runs Due to BTFP End

The Treasury Reserve balances are decreasing rapidly with the increase of TGA and the withdrawal of BTFP. If BFTP is not present, banks may face another fall as the Fed holds off on reducing interest rates and the outlook appears bleak. The Federal Reserve established the Bank Term Funding Program (BFTB) to offer additional financing to banks in times of crisis.

6 Reasons Bitcoin Price And Altcoins Could Crash After Halving: Experts

In March 2023, unexpected collapses of banks such as Silvergate Bank, Signature Bank, and Silicon Valley Bank triggered the Federal Reserve and the Treasury Department to intervene with financial assistance. The withdrawal of BFTP from lending caused a significant drain in liquidity, leaving markets temporarily pessimistic.