Source: PaxForex Premium Analytics Portal, Fundamental Insight
In under a month, Bitcoin is poised to undergo its fourth halving, a fundamental event embedded in its code that occurs approximately every four years or after 210,000 blocks are added to the blockchain. These halvings serve as the cornerstone of Bitcoin's robust monetary policy, slashing its supply growth rate by half each time.
Scheduled for around April 20, this forthcoming halving will slash Bitcoin's supply growth to approximately 0.8% annually. Historically, the impact of halvings has been significant, and this upcoming one appears no different. Here's why purchasing Bitcoin before April 20 still holds merit.
Each halving fundamentally alters the dynamics of supply and demand. By curbing the rate at which new bitcoins are introduced to the market, halvings create a scenario where, even if demand for Bitcoin remains steady, its price must rise to offset the reduced supply growth.
This trend is evident when examining Bitcoin's performance in halving years. On average, Bitcoin has surged roughly 125% during these years. However, it's the year following a halving that typically yields the most substantial gains.
On average, Bitcoin has surged by a staggering 415% in the year following a halving. This means that an initial investment of $1,000 could potentially exceed $5,000. Not a bad return by any measure.
While it's essential to acknowledge that past performance does not guarantee future success, there are compelling indications that this halving could follow a similar trajectory to its predecessors, if not surpass them in explosiveness.
Renowned crypto analyst Benjamin Cowen recently shared a chart on X (formerly Twitter) illustrating Bitcoin's performance in 2023, which closely mirrored the average performance of previous years leading up to halvings.
Moreover, Cowen's subsequent analysis compared Bitcoin's performance in 2024 thus far with past halving years, revealing that Bitcoin is currently outpacing its historical counterparts by a considerable margin. While the precise reasons behind this outperformance may be multifaceted, one factor stands out prominently.
For the first time in Bitcoin's history, the upcoming halving will take place amidst a backdrop where fewer coins are available on exchanges compared to the previous halving. Currently, approximately 2.3 million coins are held on exchanges, a level not witnessed since 2018.
This scenario gains further significance when considering the additional demand expected from newly approved spot Bitcoin exchange-traded funds (ETFs). Coupled with the compounding effects of a reduction in Bitcoin's growth rate on top of an existing supply crunch, this upcoming halving appears to be an anomaly, but one that favors the cryptocurrency.
However, while it's natural to anticipate Bitcoin's potential post-halving, it's essential to provide additional context. Historically, two years after a halving, Bitcoin's price tends to plummet by more than 80% on average.
The underlying reasons for this phenomenon may not be fully understood, but it serves as a stark reminder that Bitcoin is a long-term investment. Investors attempting to time the market often face significant losses, underscoring the importance of adopting a buy-and-hold strategy for the long haul.
Given the substantial data illustrating Bitcoin's cyclical price movements, maintaining a sufficiently long-term outlook is paramount. In fact, the optimal timeframe aligns precisely with the interval between each Bitcoin halving: four years.
Renowned Bitcoin on-chain analyst Willy Woo discovered that even if investors bought at the peak of each bull market, holding onto their coins for a minimum of four years resulted in an annualized gain of 30%. This figure is roughly three times higher than the average return of the S&P 500. Put simply, no Bitcoin held for longer than four years has ever resulted in a loss.
While the data suggests that it's not too late to invest in Bitcoin, especially before the upcoming April halving, investors must understand that Bitcoin rewards those who exhibit patience and endure the post-halving declines. As each halving cycle progresses, the likelihood of reaping the benefits of Bitcoin's diminishing supply growth increases, with each cycle compounding gains.
This is not an encouragement to engage in market timing tactics. Instead, it aims to provide context and insight into Bitcoin's unique cyclical behavior. Armed with a deeper understanding of Bitcoin's dynamics, investors can navigate the fluctuations of each halving cycle with greater confidence.
Time frame: D1
As long as the price is above 60000.00, follow the recommendations below:
- Recommendation: long position
- Entry point: 66154.00
- Take Profit 1: 75000.00
- Take profit 2: 81000.00
Alternative scenario:
If the 60000.00 level is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 60000.00
- Take Profit 1: 55000.00
- Take Profit 2: 50000.00
