Analyzing the price action and other metrics in the premier digital coin, a week after the block rewards were cut in half

The much-touted Bitcoin halving has finally taken place — an in-built mechanism to control the inflation in the crypto kingpin. Prior to the event, I wrote about how BTC was on the move with the upcoming halving. Perhaps the time frame is too short to evaluate the impact the event had on bitcoin, nonetheless, it can give a snapshot of things to come.

Before looking at what happened in the Bitcoin Options market, let’s start off with the price action. The price for BTCUSD is at a key juncture in its current trend or even the larger picture. As I discussed in my previous piece, BTC has been unsuccessful multiple times since last October to convincingly pierce the key resistance at $10K.

The good thing is that the price has rebounded significantly since the lows reached in March and maintained a short term bullish channel, but on the flip side it has failed to overtake the psychological barrier of $10K thrice since the beginning of May. And the crypto bulls who were so desperately counting on the halving event to provide the catalyst have been disappointed so far.

Not all is lost though. BTCUSD is in a congestion zone below this level and might just be consolidating before the next move up (or down) as evident in the chart above. The channel floor of $8500 seems to be acting as the support for now with any move below that signaling a pause in the current bull trend. Long term prospects of bitcoin still hinge on crossing that all-important $10K level.

Perhaps the most significant movement for Bitcoin has been in the Options market where it crossed the $1 billion mark in the Options Open Interest for the first time ever — reaching as high as $1.3 billion while trending close to the previous level at the time of reporting (chart above, left). Open interest refers to the number of options contracts that have been traded but not yet liquidated by an offsetting trade or an exercise or assignment

Deribit, the world’s biggest crypto options exchange by volume, contributed almost 90% of the total on Sunday as open positions on the Panama-based exchange reached $928 million — just below its record level of $972 million reached, post the bitcoin halving. BTC Options Volume (chart above, left) crossed an all-time high of $220 million mark, just prior to halving.

Individually, CME (Chicago Mercantile Exchange), which was the first to launch the Bitcoin futures back in Dec. 2017 saw Investor interest in bitcoin options listed on the exchange peaking to record highs — CME set a new record of $30 million, which was smashed on the following day with a total tally of $40 million, marking a 2,000% rise from the volume of $1.7 million registered a week ago.

The other metrics that are worth looking at posting the bitcoin halving are average transaction fees, hash rate and mining profitability for the bitcoin network (charts above).

• Average Transaction Fee: hit a new 11-month high of $5.16 on May 14 — a phenomenon not witnessed since June 2019, increasing 168% over the previous four days alone. The fee started to go up on April 28 — exactly two weeks before Bitcoin’s halving event. Typically, the fee increases when there is stiff competition for block space on the network, causing a sort of overload that we are currently seeing.
• Hash Rate: The computing power required to mine bitcoin, which peaked just before the halving as miners were scrambling to mine as much as possible before BTC rewards get split into half, is posting new lows as smaller players get flushed out.
• Mining Profitability: This is a pretty obvious one. Since less of BTC would be entering the market after the halving, the miners will be seeing their profitability drop. The final chart above depicts the same trajectory as the hash rate, with profitability falling to new all-time lows.

Overall, it has been a mixed reaction from Bitcoin after the halving. All eyes are still set on the price action, although ballooning investor confidence in the BTC Options market points to a healthy trend. Will BTC break that iron-clad $10K resistance? Hopefully, we will find out soon enough.

Originally Published on Medium

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