The upcoming Bitcoin halving paints a bullish picture for the leading crypto asset
There’s only a little time left until the Bitcoin halving occurs. Around April 20, Bitcoin’s mining reward will drop from 6.25 per block to 3.125, making Bitcoin scarcer. This is a quadrennial event that happens every 210,000 blocks, and it’s designed to reduce the pace of Bitcoin issuance, which means that its price could potentially rise if demand for the asset remains the same.
There have been three halvings until now: the first Bitcoin halving happened in November 2012, the next one in July 2016, and the most recent one in May 2020. The final halving is expected to happen sometime in 2140, when there will only be 21 million BTC in circulation, and miners’ payment will be in transaction fees only.
The Bitcoin halving is expected to trigger a parabolic bull run
While this is the fourth halving in Bitcoin’s history, market analysts believe it is different for multiple reasons. Firstly, the massive success of spot Bitcoin ETFs represents a historic milestone in the asset’s journey. Since its launch, Bitcoin has experienced a 60% price growth as its trading volumes hit unparalleled highs, attracting more and more investors who sought to buy bitcoin online.
The increased institutional interest in Bitcoin ETFs has resulted in an influx of over $30 billion in assets in as little as two months. In fact, in only just a day, there have been record-breaking inflows of $1 billion. This optimistic scenario that Bitcoin ETFs have created is likely to intensify post-halving returns, boosting the price of BTC 200% and placing the price of the leading crypto asset at $200K. In other words, this upcoming halving could put Bitcoin in entirely uncharted territory. The ETFs are attracting a new wave of traditional investment and if this trend continues, Bitcoin’s supply side is likely to become illiquid, potentially resulting in a parabolic bull run. That could mark new beginnings for the crypto ecosystem, and long-term Bitcoin holders are confident that the leading crypto will only go up from here.
As always, it’s essential to exercise caution and not forget about Bitcoin’s volatile nature. However, if the optimistic narrative for the upcoming halving comes true, it could trigger an era of financial recognition and institutional adoption for Bitcoin, so investors should keep an eye on the market trends.
How can investors capitalize on the upcoming Bitcoin halving?
Based on past trends, Bitcoin undergoes massive price fluctuations before and after the halving, resulting in investment opportunities. Let’s further explore some of the strategies that traders can employ to optimize their returns.
Investment planning (short-term and long-term)
You can’t develop your trading techniques unless you assess your risk tolerance and outline your investment goals. So, consider how you want to use Bitcoin—do you see it as a store of value or want to leverage price fluctuations to potentially increase your profits? Once you get a clear picture of your risk appetite, you can develop a short- or long-term strategy.
A short-term strategy is ideal for those seeking to capitalize on Bitcoin’s price movements to get short-term returns. To pull off this strategy, it is necessary to conduct a detailed technical analysis and adopt effective trading strategies while maintaining sound judgment. Also, it is essential to keep an eye on price movements and trends in the market and establish entry and exit points.
On the other hand, a long-term strategy is also known as hodl, requiring traders to buy and hold the crypto asset. This is suitable for those who are committed to crypto in the long run, as there are no guarantees that the price of Bitcoin will boost after the upcoming halving. According to past events, its price is likely to increase a few months or years after halving, so investors must remain patient and capitalize on returns when the opportunity arises.
Portfolio diversification
One of the strategies traders employ the most is portfolio diversification, which aligns with one of the golden rules in crypto that says never to put your eggs in one basket. By diversifying, traders can spread their risks, thus reducing the impact of an underperforming asset. While Bitcoin may be a primary asset in their portfolio, it is recommended that traders exploit other opportunities in the market to create a well-balanced portfolio. Suppose the price of Bitcoin rises; in this case, someone holding Bitcoin can sell some of their coins and invest in other assets (whether cryptocurrencies or traditional ones) to ensure their investment portfolio is lucrative.
Bitcoin derivatives trading
A derivative is a contract that is made between a trader and another party, where Bitcoin serves as the underlying asset that establishes the derivative’s value. Using this strategy during the halving event can help traders navigate volatility and market speculation effectively, hoping for gains if they bet adequately. Another reason why traders may engage in derivatives is to hedge against long positions (in other words, they believe the value of Bitcoin is likely to increase, and they want to profit from it). This strategy can be effective in covering some losses in case the price of Bitcoin doesn’t increase within the given time.
Timing the market
You may have heard of the principle “buy the rumor, sell the news” – this is what this strategy is all about. Investors keep an eye on the market to stay updated with the latest news, conduct market analysis, and make a smart move only when they see trading signals. It’s worth noting that this strategy is challenging when it comes to maximizing profits during the Bitcoin halving, as investors’ timing must be spot on – and this doesn’t happen often. Besides, although post-halvings have triggered bullish runs, this shouldn’t be taken as a guarantee for the future, and it’s best to do your research before making any decision.
The bottom line
The upcoming Bitcoin halving could have massive implications on the entire crypto ecosystem, potentially boosting BTC price tremendously. However, during the halving, volatility also tends to increase, so investors should be aware of this and keep a level head. While scarcity is likely to drive price appreciation, lowered mining activity could lead the price to level off. The best approach for investors is to look at the overall growth of the network instead of focusing on the halving event only – if the network keeps evolving, it’s only a matter of time until Bitcoin fulfils its potential as a global store of value.
