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February 5, 2019

Is There an End In Sight For Bitcoin’s Agony?

Throughout bitcoin’s 10-year history, we have witnessed both breath taking rallies and painful losses for the benchmark cryptocurrency. After hitting an all time high of $19,850 on 17 December 2017, bitcoin entered into a prolonged period of steady declines. The losing streak has already extended in 412 days, which makes it the longest ever downtrend the digital currency has seen. Its duration surpasses even the notorious bear market in 2013-2015, which continued for 410 days.

 

Firmly trading below $3,500 this week, bitcoin has lost about 83% of its value from top to bottom. In spite of being the longest losing streak not only for bitcoin but for any cryptocurrency, the current slide is not yet the worst one in terms of total depreciation. The record is held by the bear market in 2011. At that point, 163 days were enough for the major cryptocurrency’s price to plunge with more than 93%. This dramatic fall took it from a high of $31.53 to a low of $2.02.

 

In this situation, everyone who has some exposure to the market is asking himself what could be the game changer which will reverse the huge selling pressure bitcoin is facing. If history is to repeat itself once again, the event capable of turning the tide could be the bitcoin block reward halving, which is due 25 May 2020.

 

Halving is a key component of bitcoin’s deflationary monetary policy. Happening once every four years, the reward per mined block is decreased by 50%, which effectively slows down the creation of new coins. This shift in balance between supply and demand in favor of the latter has proved to be a strong bullish catalyst for the price of bitcoin.

 

Having said this, it should be just a matter of time for the market to adjust to this expected state of demand outpacing supply, which would set the stage for a massive bitcoin rally. A quick look in history shows that the price bottomed 378 days before the first halving in 2012 and 539 days before the second one in 2016.

How many days prior to the third halving will bitcoin bottom out? Are we going to see another strong bitcoin rally as in the previous two occasions?

These are all questions that are going to be answered soon.