June 23 And Counting

Over the past week Bitcoin has continued its strong push forward, moving from $580 to a high of $789. This reflects a move of 36%, and a YTD return of almost 75%. Recent polls suggest that the support for Brexit is softening, which could be the cause of the correction in prices down to the high $600’s. Previously traders have been pricing in the increasing likelihood of an exit which could see a fresh flow of funds into Bitcoin; if Bremain happens then we may see profit taking and a move back to $500 or $600 territory.

Going back to the continued halving rhetoric, if we stay in this price range post-halving then the rewards are similar to the levels we had pre-halving. A price of $300 to $400 pre-halving dissuades new mining operations. Cutting that subsidy in half, that leads to an equilibrium of $600 to $800. Below $600 miners start exiting, above $800 miners start entering. The question is how many miners would exit at a price around $600. If this is a non-trivial percentage of the network, that could cause the price to decline quickly. The hash rate would drop, blocks would take longer, confidence would decline, and that would lead to a sharp price correction.

Bitcoin mania may be coming back and we may retest the all-time high. Conversely, we may see a correction given the incoming vote which could trigger further chaos. Don’t forget to place tight stops if you are trading this volatility!