Bitcoin Cash Sends Bitcoin Traders a Cautionary Signal Regarding the Halving Event

Bitcoin Cash has often served as an indicator for the forthcoming halving of rewards on the Bitcoin blockchain, and its recent decline of 15% following the halving could serve as a warning sign for Bitcoin enthusiasts.

As Bitcoin’s fourth mining reward halving approaches on April 20, historically, this event has heralded extended periods of bullish activity. However, with just eight days until the event, Bitcoin’s offshoot, Bitcoin Cash (BCH), is prompting traders to reconsider their expectations for an immediate post-halving surge in price.

The rally in BCH, which occurred shortly after its parent blockchain reduced block rewards to 3.125 BCH on April 4, stalled above $715 and subsequently retreated by 15% to $604. Moreover, the notional open interest in BCH-related perpetual futures has plummeted by 70% to $376 million within seven days, while perpetual funding rates have turned negative, suggesting a reversal in bullish sentiment.

Algorithmic trading firm Wintermute has observed BCH’s role as a proxy for BTC’s upcoming halving, implying that Bitcoin could experience selling pressure following April 20. Wintermute noted a surge in speculative activity in BCH over the past month, potentially driven by traders viewing it as a precursor to Bitcoin’s halving.

Analysts have cautioned that BTC may have already priced in the impending reduction in supply expansion and could witness a sell-off post-halving. JPMorgan anticipates a decline to $42,000 once the hype surrounding the halving diminishes.

Despite Bitcoin’s current price of $70,700, marking a 67% year-to-date increase, and recently surpassing its 2021 peak, reaching new highs above $73,000, history suggests that significant price movements often occur several months after halving events.

According to 10X Research, post-halving miner sales could pose challenges for bullish momentum in the summer months. Founder Markus Thielen estimates that miners may liquidate up to $5 billion worth of BTC post-halving, potentially leading to a prolonged period of sideways price action.

Bitcoin miners, who validate transactions and add blocks to the blockchain in exchange for BTC rewards, will see their rewards halved per block following the upcoming event. This reduction in rewards could impact the market dynamics for the next few months, as observed in previous halving cycles.