A new research study published by cryptocurrency trading platform Strix Leviathan has revealed that cryptocurrency halving events do not necessarily result in the asset outperforming the market.
The report published on June 21 also showed that coins undergoing a halving did not experience “outsized” volatility before or after the event.
Halving Does Not Impact Performance of Cryptocurrencies
In its report, Strix Leviathan explained how the phenomenon of halving block rewards could result in a price rise. The logic behind this is that when miners earn less, selling pressure would decrease and the asset’s associated price would increase.
The report highlighted Litecoin (LTC) as one cryptocurrency that has an upcoming halving event and also experienced a rapid surge from $22 in December 2018 to $130 in July this year. According to the researchers, however, this event was a mere coincidence.
They analyzed 32 halving events spread across 24 cryptocurrencies and compared their market position six months pre and post halving. They eventually came to the conclusion that, in almost all circumstances, cryptocurrencies experienced very little volatility during these times.
The report showed that Litecoin dropped in value after its first halving, even though it outperformed the market leading up to the event. The report was further validated when Bitcoin (BTC) showed completely opposite behavior to Litecoin, displaying poor performance leading up to halving and then a stronger showing post-event.
Narrative Affecting Performance
According to the report, the narrative of supply and demand has been carefully constructed to prove that halving does affect the performance of cryptocurrencies. The authors continued,
“It appears more likely that the return behavior before, during, and after a halving coincides more with increasing levels of speculation than with an underlying shift in sell side pressure.”
This suggests that market speculation has more to do with the rise and fall of the prices of cryptocurrencies than halving — quite similar to other instances where speculation can create a bull market out of thin air.
According to the Bitcoin white paper, these events will naturally cause mining revenue to fall, transaction fees will still make up for the losses. Post the next halving event scheduled to take place next year, the reward per mined block will drop from 12.5 BTC to 6.25 BTC.
While the cryptocurrency community considers halving events to be a stimulus for a bull market, Strix Leviathan’s researchers clearly suggest otherwise. Do you agree with their conclusion? Let us know your thoughts in the comments below.