Bitcoin halving is an important event within the crypto walls that happens every four years to reduce mining rewards and minimize the rate at which BTC enters circulation. The halving event is hard-coded, meaning no one has the power to alter it.
It is crucial for traders to follow developments around Bitcoin halving since this event has a massive impact on the price of BTC. In this article, we will explore some of the trading strategies traders can apply during Bitcoin halving. Moreover, we will take a look at BTC’s previous performance before and after the event.
Explaining Bitcoin Halving
Like many proof-of-work blockchains, Bitcoin has miners responsible for validating transactions and securing the network. In exchange for their contribution, miners receive newly minted BTC as rewards. These rewards are reduced by half during Bitcoin halving.
As mentioned earlier, the goal of the halving event is to reduce the rate at which new BTC enters the circulating supply. The creator of Bitcoin, Satoshi Nakamoto, believed that by minimizing supply, the value of Bitcoin will continue to grow.
When Bitcoin entered the market in 2009, miners were rewarded 50 BTC for each transaction block they mined. When the first halving event occurred in 2012, the mining rewards dropped to 25 BTC. In the 2016 and 2020 halving events, miners saw their rewards reduced to 12.5 BTC and 6.25 BTC, respectively. These rewards are expected to decline further to 3.125 BTC in April 2024. Bitcoin halving events are set to continue until the entire supply (21 million BTC) is mined.
Bitcoin Halving in 2024
As of this writing, the exact date when Bitcoin halving will happen is not yet known because the event occurs when the 210,000th block is mined, and it is tough to predict the date when this will occur. However, blockchain experts believe the date will be in April.
The 2024 halving event will be the fifth. The final halving is expected in 2140. After that, there will be no BTC available for mining.
Historical Impact of Bitcoin Halving on the Price of BTC
Historical data shows that halving events tend to have a positive impact on Bitcoin’s price. Such events cause people to be bullish over the crypto markets, thus driving prices up. Moreover, Bitcoin’s price surges due to other reasons like supply-demand dynamics. A drop in BTC’s supply makes the coin more scarce, enhancing demand and propelling its value.
In addition, Bitcoin halving grabs investors’ interest and causes FOMO (fear of missing out), which in turn boasts buying activity.
Although historical data shows a correlation between Bitcoin halving and price rallies, this isn’t guaranteed. Therefore, investors are advised to conduct their own research and invest carefully.
In the last two halving events, consistent price trends were witnessed. For example, in 2016, Bitcoin’s price before halving was $660, and after the event, it surged to $2,230 within a year. In 2022, Bitcoin’s before-halving price was $8,750; within six months, BTC rose to $29,100. Analysts are optimistic that Bitcoin will perform similarly after April’s halving event.
Trading Opportunities and Market Volatility During Bitcoin Halving
Market volatility tends to increase during Bitcoin halving. While such a scenario comes with several risks, it also creates trading opportunities for traders to explore. So, which are the trading strategies to apply during Bitcoin halving? Given the current trend (uptrend), traders can identify key support levels and open long positions once Bitcoin reverses from there.
Despite Bitcoin trending upwards, it does not mean that there won’t be opportunities to go short. To open a short position, you should first identify sell zones and resistance levels and watch how Bitcoin’s price reacts at those points. If the coin turns down, you can go short.
You can also apply the breakout trading strategy, which involves going long when Bitcoin breaks above the resistance level or going short when a break below a support level happens. However, beware of fake breakouts. To avoid losing funds, employ proper risk management measures.
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