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Bitcoin Cash (BCH) is sending Bitcoin (BTC) traders a halving warning signal
We are just eight days away from Bitcoin’s fourth mining reward halving, a scheduled 50% reduction in the pace of supply expansion. This event, scheduled every four years, has historically presaged multi-month bull runs.
However, before the crucial event, that of bitcoin (BTC) bitcoin cash derivation (BCH) issues a warning, asking traders to reevaluate expectations for an immediate price increase after the halving.
The rally in BCH, a cryptocurrency created in 2017 by hard forking the original Bitcoin blockchain, lost momentum above $715. day after its parent blockchain halved coin issuance per block to 3,125 BCH on April 4. Since then, BCH prices have fallen by 15% to $604, Show CoinDesk data.
Notional open interest or dollar value locked in the number of active perpetual futures linked to BCH has plummeted 70% to $376 million in seven days, according to CoinGecko. Meanwhile, annualized perpetual financing rates on major exchanges turned negative earlier this week, indicating an unwinding of bullish bets. Negative funding rates mean that perpetuals trade at a discount to the spot price of the underlying asset.
According to algorithmic trading firm Wintermute, BCH has been seen as an indicator of BTC’s impending halving, meaning the leading cryptocurrency could face selling pressure after April 20.
“Over the past month, fast money has been seen in BCH, potentially trading the coin as a proxy for Bitcoin’s impending halving; an interesting move in funding rates as criminals currently trade under spot,” Wintermute said in a newsletter weekly shared with CoinDesk.
Several analysts they warned that BTC has already priced in the imminent slowdown in the pace of supply expansion and it could fall in a classic”sell the newspost-halving type move. Investment banking giant JPMorgan expects a sell-off to $42,000 once the halving hype dies down.
As of this writing, Bitcoin changed hands at $70,700, a 67% gain year to date, CoinDesk data shows. Prices recently surpassed their 2021 peak, reaching new record highs above $73,000 well before halving. Historically, new highs have come months after the halving.
Post-halving miner selling could make it harder for bulls to push prices higher in the coming summer months, according to 10X Research.
“Based on our calculations, miners could potentially liquidate $5 billion in BTC after the halving. The surplus from this sale could last four to six months, which explains why Bitcoin could go sideways in the coming months, as it has happened in the past,” said Markus Thielen, founder of 10X Research.
Bitcoin miners are entities that solve complex mathematical problems to verify transactions and add new blocks to the blockchain in exchange for rewards paid in BTC. The upcoming halving will reduce the block reward by 50%.