The highly anticipated Bitcoin halving is set to occur sometime in April. As the most anticipated event in the crypto and blockchain world, one might wonder why for what reason. The past three halvings resulted in a surge in the price of Bitcoin shortly after the event, leaving many investors to expect something similar. As investors and individuals gear up to buy Bitcoin before the halving event, we will explore some things you should expect.
How Bitcoin halving will affect its price
Bitocoin’s halving is made to ensure the coin’s scarcity. It is a simple economics that dictates that the asset price will benefit from a fall in supply. The past halvings have always adhered to this rule, as Bitcoin climbed to new all-time highs after the events. In the last halving, the price grew from below $9,000 to more than $60,000 in about a year.
However, not every investor or analyst is keen on Bitcoin repeating this feat. JPMorgan has predicted that the price might fall to $42,000 or about a third of this time due to the high cost of production. On the other hand, the inception of ETFs and the increasing institutionalization of cryptocurrency makes the coming halving a possible historic event.
What you should expect
The halving has the potential to cause a supply-demand imbalance that might result in a price increase. However, this would not be the sole factor influencing the price of Bitcoin. Factors like macroeconomic conditions and investor sentiments can also affect the price, either by increasing or decreasing it.
As the halving draws near, it is vital for investors and traders who intend to buy Bitcoin to prepare for a potential increase in prices of other cryptocurrencies, popularly called altcoins, the possibility of consolidation in Bitcoin mining, and increased volatility.
Can you make money from Bitcoin halving?
With constant demand, experts predict the halving will double the value of Bitcoin. Historically, data has shown that investing in Bitcoin before a halving event is profitable. Usually, the coin’s price starts to surge six months before the halving occurs, and during the halving, the price doesn’t change much, with the peak of exchange observable in more than a year after the halving event.
A look at the price dynamics of the year that precedes and follows the halving events in the last three cycles shows tremendous growth for Bitcoin. In these last halving events, the coin has experienced significant growth with an approximately 30,000% (2012), 786% (2016), and 712% (2020). If Bitcoin follows this same pace in the coming halving, the price could reach above $200,000 in 2025.
However, as a trader, it is best you focus on short timeframes. Just 150 days after the first Bitcoin halving occurred, Bitcoin increased by 928%, and a 16.6% surge in the second halving event, while the third halving event saw the coin go up by 25.8%. These data shows that making profits is best realized in short time frames.
Endnote
As an investor or cryptocurrency trader, the impact of the coming bitcoin halving is the potential price fluctuations during the event. Though the excitement around the coming halving is expected, you shouldn’t rely on past indicators to predict future outcomes. It could also be dangerous if you get caught up in the hype. Be sure to do your research properly, and if necessary, seek advice from a qualified professional before investing.
