MetalSwap Knowledge - Bitcoin Halving Volatility

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As we draw ever closer to one of the most significant events in the crypto world, namely the much-anticipated Bitcoin halving, it's time to analyze the volatility of BTC during the past halvings, with the goal of creating some strategies thanks to MetalSwap's hedging contracts.

What’s the Halving and When Is It Happening?

For those not familiar with the Bitcoin halving, it is an event that occurs every four years and essentially cuts the block rewards for miners in half.

As of today, 6.25 BTC are mined every 10 minutes. After the halving, these rewards will be cut in half, so for every mined block, the rewards will be 3.125 BTC.

At this moment, the hype around this event is increasing as it is about a month away.

Unfortunately, it is impossible to estimate an exact date because Bitcoin blocks are not mined exactly every 10 minutes, making it impossible to know precisely when it will reach block 840,000, the halving block.

The past halving and the volatility

To date, we have seen only three halvings, which were completed on the following dates:

  • First Halving: November 28, 2012 - The reward per block went from 50 to 25 BTC.
  • Second Halving: July 9, 2016 - The reward per block was reduced from 25 to 12.5 BTC.
  • Third Halving: May 11, 2020 - The reward per block was cut from 12.5 to 6.25 BTC.

As we can imagine, this is an event that brings a lot of volatility to the market, especially in the period just before it.

This volatility is not attributed to technical uncertainty regarding the halving update but mainly because it is an extremely anticipated event, involving expectations and hype that move the market.

The last halving

If we want to get an idea of the volatility we can expect during this special period for Bitcoin, the best thing is to analyze what happened to the BTC price around the last halving.

In the following image, we have identified on the BTC chart the date of the halving and created two boxes regarding the two months pre-halving and the two months post-halving:

As we can see, there was a clear appreciation in the two months preceding the halving, while a more stable period in the two months following this event.

However, as is well known, historically BTC has had incredible performance in the months following the halving, and it is approximately from 6 to 18 months after this event that the various bitcoin bull-runs have historically occurred, followed by the rest of the crypto world.

MetalSwap and halving

Whether you think the price of BTC might rise or fall in the periods before and after the halving, with MetalSwap's hedging contracts, you have the opportunity to take advantage of this situation.

Mainly in two ways:

  • You can approach MetalSwap's hedging contracts from a speculative point of view, creating leveraged positions without paying any funding rate as with its perpetuals.

  • Similarly, you can approach it from a hedging perspective, opening unleveraged positions that hedge the volatility of BTC for the predetermined period.

In the next episode of this mini-series related to the Bitcoin halving, we will analyze practical case studies of using MetalSwap in correlation with this highly anticipated event.

For now, we invite you to visit the dApp and stay updated through the official blog to follow new articles.


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✎ What is MetalSwap?

MetalSwap is a decentralized platform that brings Hedging Contracts on financial markets with the aim of providing coverage to those who work with Digital Assets and an investment opportunity for those who contribute to increase the shared liquidity of the project. Allowing the protection for an increasing number of operators.

With MetalSwap we enable Hedging Contracts on the DeFi field, AMM style.