The halving, sometimes called the halvening, is an event that automatically occurs every 210,000 blocks – approximately every four years – decreasing the number of new coins entering the Bitcoin network. The most recent event took place in May 2020, when block 630,000 was mined, resulting in a reward of 6.25 BTC. With time, the impact of the halving will weaken as the block reward approaches one Satoshi. The maximum number of BTC that can be issued is 21 million. The supply limit can be changed, in theory at least, but it’s unlikely to happen. Bitcoin acts like digital gold and is the best substitute as a store of value.
There’s no need to worry about the Bitcoin halving because it’s a programmed and anticipated occurrence. Still, you must be aware of the future short-term market volatility stemming from the most critical event in the cryptocurrency calendar. In other words, prepare yourself emotionally and financially for price swings, adjusting your trading and investment strategies accordingly. If you plan to buy Bitcoin with credit card, understand that the circumstances surrounding the halving are unique, and demand for Bitcoin can fluctuate sizably.
The Halving Impacts Bitcoin, Its Market Supply, And the Price Dynamics
Bitcoin is regarded as inflation-resistant because its scarcity protects its value when prices rise across the economy. It was conceived to imitate the stable inflation rate of gold. Bitcoin can’t be deflationary because the rate of the stored supply doesn’t surpass new token issuance. As a matter of fact, Bitcoin’s supply will slowly but surely increase until it reaches the hard cap, which is written in the source code and enforced by the network. The halving directly impacts the BTC supply by reducing the rate at which new coins are generated, creating scarcity, which is the best scenario for creating value.
The price trends from historical data and fundamental analysis indicate that halving events tends to have a positive effect on the Bitcoin price. When supply decreases and demand remains constant or even increases, bitcoin’s value tends to rise. The halving attracts new investors and encourages FOMO (fear of missing out), therefore contributing to a rise in trading activity. Bitcoin’s price is highly volatile in the short term but presents growth potential over the long run. Success isn’t guaranteed, though, so do your homework to get a good understanding of price trends.
You Can Trade the Bitcoin Halving by Speculating on The Price of The Cryptocurrency
The best thing you can do is avoid getting caught up in the trading frenzy that occurs in the immediate run-up and aftermath of the Bitcoin halving. The feedback effect from the cryptocurrency market gives rise to FOMO, so speculators want to trade like others, generating considerable pressure on prices. Coordination among traders is sometimes desirable for efficiency, but it can sometimes push in the opposite direction. You can speculate on the price of the cryptocurrency without actually possessing the asset using a spot ETF, which tracks the price of Bitcoin in the cryptocurrency market. Many brokerage platforms allow you to fund your account using your bank account.
One of the main advantages of trading cryptocurrency with a spot ETF is you can do it without an exchange account or wallet. The price is pegged to the Bitcoin held in the fund, so you can take a position regardless if you expect it to rise or fall in value. Even if you have reason to believe that the halving event will have a dramatic impact on the price of BTC. Don’t’ expect it to skyrocket overnight. The last time Bitcoin halved, the coin didn’t reach its highest price in market capitalization ($68,000) until 18 months later.
Follow The Dominant Trend Before and After the Bitcoin Halving
You can follow the prevailing trend in the cryptocurrency market before and after the halving event, taking a long position to maximize profits during a bull trend or a short position, hoping for prices to decline. Discern resistance and support levels to execute trades when the BTC price moves beyond these levels. Resistance is the level at which the price stops falling and bounces back up, while support is the level where prices suddenly begin trending down. They’re not exact numbers, just so you know. With candlestick charts, resistance and support levels are depicted as shadows. As you’ll see, the price merely tests the level.
Buy Low and HODL Remains the Preferred Strategy for Bitcoin In 2024
Seek attractive returns by accumulating BTC at favorable rates before the halving event and hold on tightly, even if you miss out on immediate cash flow. In other words, commit to your chosen investment for the long term rather than buying or selling frequently. Even missing just a couple of days can have a significant impact on your long-term returns. HODLing is a relatively straightforward investment strategy – all you have to do is buy Bitcoin and hold it in a secure wallet until it’s made a satisfying profit and can be sold. Challenging as it may be, leave your funds alone.
The optimal investment path is cyclic, so there’s no question of instant accumulation. The ideal accumulation period is between the market bottom, namely the most recent halving event, and the next halving, which is expected to occur in April 2024. According to historical data, the best time to invest in Bitcoin is three years after the halving event, when the cryptocurrency market ends its bull and bear runs. You can explore price differences across various cryptocurrency exchanges, leveraging on the opportunities by buying on one exchange and selling on the other. Different trading platforms aren’t synchronized with one another.
Conclusion
Every four years or so, the rate at which new Bitcoins are created is reduced considerably, so miners receive 50% fewer BTC per block reward. The halving draws attention to the cryptocurrency space, attracting new investors and leading to a phenomenon called FOMO. It’s important to acknowledge the possibility of a bear trend or temporary price corrections if cryptocurrency market expectations aren’t aligned with the actual outcomes.