Back to the list

Bitcoin Dump Post Halving Will Be Caused By Exchanges Themselves, Says Willy Woo


cryptopotato.com 09 May 2020 13:30, UTC
Reading time: ~3 m

Another popular cryptocurrency analyst believes that it’s entirely plausible the price of Bitcoin to plunge following the halving. He argued that exchanges offering futures trading will induce the biggest sell pressure on the market.

BTC Price To Drop Because Of Exchanges

With the third Bitcoin halving scheduled to take place only a few days from now, speculations regarding potential price effects continue to spiral. Popular on-chain analyst, Willy Woo, believes that after the event, miners will “cease to be the biggest sellers of Bitcoin.” They will be replaced by large exchanges selling BTC fees into fiat.

“You can think of exchanges as tax agents on traders. That tax, extracted in fees in BTC, gets dumped onto the markets and sold for fiat. It’s similar to miners where coins gained by diluting the supply get dumped on the market that new demand needs to absorb.” – he added.

Woo clarified the difference between exchanges selling the fees and traders buying or selling. When users are buying or selling assets, every trade is matched. Meaning, for every sell, no matter how massive it is, there’s a buyer on the other side.

However, miners selling their rewards and exchanges selling the fees they have collected are the only two unmatched sell pressures on the market, Woo explained.

Following the halving, the rewards for miners will be cut in half. Consequently, they will have significantly less freshly minted bitcoins to sell. On the other hand, the role of cryptocurrency exchanges, especially those offering futures trading, has been increasing in the past few years.

Woo concluded that with a daily volume of about $1b per exchange, the situation would be as follows:

“1,800 BTC/day from miners pre-halving.
900 BTC/day from miners post-halving.
1,200 BTC/day from exchange fees.”

Ultimately, Woo said that futures exchanges have a somewhat controversial role in the market. While they bring liquidity and offer useful hedging for legitimate use cases, they will also “put the largest bearish pressure on Bitcoin from here on in.” Thus, he reasoned that futures trading slows down cryptocurrency market progress.

Not All Exchanges Are Equal

Woo’s point of view is quite compelling just days prior to arguably the most anticipated event in the cryptocurrency community this year.

A recent report supported his words that the trading volumes on cryptocurrency futures exchanges have been surging lately. They have a significant role, which could, indeed, have some effects on the market.

However, Aaron Gong, head of Binance Futures, told Cryptopotato that not all exchanges operate in the same manner:

“Woo’s statement only might be valid on inverse futures, that contracts are settled in BTC and exchange fees are also being paid in BTC. In contrast, Binance Futures are settled in USDT and not inverse contracts. As such, it will not be a case for exchanges such as Binance.”

Back to the list