coindesk.com
BCH's post-halving slide of 15% might be a warning sign for bitcoin bulls.
Bitcoin cash has been seen a proxy for the upcoming halving of rewards on the Bitcoin blockchain.
Bitcoin's blockchain will halve rewards on April 20.
Bitcoin's fourth mining reward halving, a programmed 50% reduction in the pace of supply expansion, is just eight days away. This event, scheduled to happen every four years, has historically presaged multi-month bull runs.
However, ahead of the pivotal event, bitcoin's (BTC) offshoot bitcoin cash (BCH) is flashing a warning, asking traders to reassess expectations for an immediate post-halving price rise.
The rally in BCH, a cryptocurrency created in 2017 from the hard fork of the original Bitcoin blockchain, ran out of steam above $715 one day after its parent blockchain halved per block coin emission to 3.125 BCH on April 4. Since then, BCH's prices have declined 15% to $604, CoinDesk data show.
The notional open interest or the dollar value locked in the number of active perpetual futures tied to BCH has collapsed 70% to $376 million in seven days, according to CoinGecko. Meanwhile, the annualized perpetual funding rates across major exchanges turned negative early this week, indicating an unwinding of bullish bets. Negative funding rates mean perpetuals trade at a discount to the underlying asset's spot price.
According to algorithmic trading firm Wintermute, BCH has been seen as a proxy for BTC's impending halving, meaning the leading cryptocurrency could face selling pressure after April 20.
"Over the last month, fast money has been seen in BCH - potentially trading the coin as a proxy for the upcoming Bitcoin halving; an interesting move in funding rates as perps currently trade under spot," Wintermute said in a weekly newsletter shared with CoinDesk.
Several analysts have warned that BTC has already priced in the impending slowdown in the pace of supply expansion and could drop in a classic "sell the news" type move following the halving. Investment banking giant JPMorgan expects a sell-off to $42,000 once the halving hype subsides.
Bitcoin changed hands at $70,700 at press time, representing a 67% year-to-date gain, CoinDesk data shows. Prices recently surpassed the 2021 peak, reaching fresh record highs above $73,000 well before halving. Historically, new highs have come months after halving.
According to 10X Research, post-halving miner sales could make it more difficult for bulls to push prices higher in the upcoming summer months.
"Based on our calculations, miners will potentially liquidate $5 billion worth of BTC after the halving. The overhang from this selling could last four to six months, explaining why bitcoin might go sideways for the next few months – as it has done in the past," Markus Thielen, founder of 10X Research, said.
Bitcoin miners are entities that solve complex mathematical problems to verify transactions and add new blocks to the blockchain in return for rewards paid in BTC. The impending halving is set to reduce their per-block reward by 50%.