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Cryptocurrency market volatility increases as Bitcoin halving nears

The third Bitcoin halving is scheduled to take place on the 14th of May 2020. When the latter occurs, Bitcoin block rewards will be cut in half once again to a mere 6.25BTC per block. For some perspective, when Bitcoin was first created by Satoshi, that block reward used to be 50BTC.

This inherent feature makes Bitcoin more scarce as time passes, and by applying the basic concepts of supply and demand on this particular case, we’re seeing a diminishing supply and a rising demand as Bitcoin gains popularity amongst both retail and institutions.

As there have only been two halvings prior to this upcoming one, the data available to analyse the possible scenarios is rather slim. Nonetheless, by looking at these two data points we’ve seen a recurring increase in volatility (upside and downside) prior to the event and a significant rise to new all-time highs after the halving.

The steep decline seen in the cryptocurrency market yesterday is considered to be part of the pre-halving volatility. Nonetheless, it is always beneficial to take a step back and look at the bigger picture. This decline we’re seeing, on Bitcoin in particular, is after an extraordinary +250% rally in three-months only. Therefore, the steepness of the moves is simply a quality of Bitcoin’s price action.

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