With bitcoin more than doubling in price since “Black Thursday” nearly two months ago, nearly 85% — or 25.79 million — of addresses holding the cryptocurrency are now “in the money,” according to blockchain intelligence firm IntoTheBlock. However, the current state of the bitcoin market is warning of a post-halving price pullback.

The number one cryptocurrency by market value is trading near $10,000 at press time - up nearly 160% from the low of $3,867 registered on March 12, according to CoinDesk’s Bitcoin Price.

An address is said to be in the money if the current price of bitcoin is higher than the price at which the coin was purchased or sent to the address.

While 85% of the addresses are in the money, 10.8%, or 3.28 million addresses are out of the money or have acquired coins at an average price higher than the current market price. The remaining 4.1% (1.24 million) are at the money, meaning the average price they acquired their bitcoin is around current market levels.

Such a structure may not bode well for the cryptocurrency in the near term. With the majority of addresses already in a state of profit, some observers expect selling pressure to emerge over the weekend or following the mining reward halving expected on May 11.

“We anticipate a number of investors will take advantage of rising prices ahead and into the halving to realize gains in the short term," said Ed Hindi, CIO of Tyr Capital Arbitrage SP, which focuses on liquidity provision and arbitrage within the cryptocurrency markets.

Meanwhile, market intelligence firm Glassnode tweeted on Thursday that more than 80% of the current bitcoin supply is profitable and significant increases to BTC's price in anticipation of the halving could trigger some to realize gains in the short term.

Increased retail participation

A post-halving drop looks quite possible because the retail participation has gone up over the past few months. The number of addresses holding at least 0.1 BTC began increasing exponentially from February and recently rose to a record high of 3,014,888, according to Glassnode data.

The address growth continued even while bitcoin’s prices slid from $10,000 to the $3,867 seen in the first half of March. Put simply, some investors look to have acquired coins at below $5,000 are now sitting on more than 100% returns.

Gains of that magnitude may lead more than a few small traders to lock in profits at current prices.

Halving priced in by large traders

The potential bullish impact of the reward halving on bitcoin’s price has been extensively discussed over the past few months. At the same time, the participation from large traders, popularly known as whales, and macro traders and institutions has gone up.

The number of addresses holding at least 10,000 bitcoin recently rose to the highest since August. The metric has increased by over 10% since early March.

Open interest, or open positions, in bitcoin futures listed on the Chicago Mercantile Exchange jumped to a record high of $489 million on Thursday. The CME open interest is widely considered as a proxy for macro traders or institutions.

Thus it appears large traders have priced in halving at least to some extent and may book profits following the halving, pushing prices lower.

“As institutional investors have got involved, we believe the longstanding and well documented buy the rumor and sell the fact trading strategy will be a key driver of short-term price action,” said Hindi.

Pullback would be temporary

While the cryptocurrency could come under pressure after halving, analysts are confident the dip would be short-lived.

This is because the current macro environment may likely bolster bitcoin’s appeal as a hedge against inflation. Not only is bitcoin’s pace of supply expansion scheduled to drop by 50% next week, the supply cut is happening at a time when the major central banks are pumping unprecedented amounts of liquidity into the system to counter the negative impact of the coronavirus outbreak on the economy.

“If inflation reigns going forward, bitcoin will go off the dial. I am currently amassing BTC,” said Clem Chambers, founder and CEO of financial markets website ADVFN.com.

Richard Rosengren, co-founder of crypto trading firm GSR, said the general retail and traditional financial communities are severely under-allocated versus traditional asset classes.

As of now, Renaissance Technology and legendary trader Paul Tudor Jones II are the only known traditional market bigwigs to have forayed into cryptocurrencies.

Thus, there are plenty of interested investors still waiting on the sidelines who could enter the market on price dips.

Historical data also support the argument that post-halving dip would be short-lived. Bitcoin fell by nearly 30% in the four weeks following its second halving, which took place on July 9, 2018. In the following months, however, the cryptocurrency steadily gained altitude and rose to fresh record highs above $1,160 in March 2017.