How to Trade During Bitcoin Halving in 2024?

Understanding Bitcoin Halving

The Bitcoin Halving event is one of the most prominent events in the crypto industry that reduces Bitcoin mining rewards by half for every four years. The anonymous founder of Bitcoin, Satoshi Nakamoto has set some predefined conditions to ensure that Bitcoin achieves a limited supply of 21 million tokens. Bitcoin Halving is the most important condition among others that keeps the supply in check. Because, it reduced the BTC mining rewards by 50% for every four years and controls the rate at which new Bitcoins come into circulation.

The Bitcoin blockchain network relies on the Proof-of-Work (PoW) consensus mechanism, which requires miners to verify transactions and add new blocks to the network. In exchange for successfully verifying transactions, miners receive block rewards in the form of Bitcoins. These newly minted and rewarded Bitcoins come into circulation and add to its existing supply. During a Bitcoin Halving event, that occurs every four years, mining rewards will be reduced by half and ensures that the network achieves 21 million limited supply.

Bitcoin Halving History and Impact on BTC Price

Every time when a Bitcoin Halving event takes place, it brings a considerable change in the demand-supply dynamics of Bitcoin and will impact its market price. The first Bitcoin halving event took place in November 2012, four years after the Bitcoin blockchain was launched. The initial BTC block reward, which is 50 BTC, was reduced by half to 25 BTC after the first Bitcoin Halving.

During the first halving event, Bitcoin price was trading at around $13. However, after one year its value increased significantly and reached $1,000 in 2013. At this time, not only the supply slash but also the increasing awareness and gradual adoption of Bitcoin has also contributed to the rise in Bitcoin value.

The second Bitcoin halving event took place in July, 2016 and reduced the 25 BTC mining reward to 12.5 BTC. While the Bitcoin price was around $700 during this time, it took more than one year for Bitcoin’s price to reach a new all-time high value of around $20,089 after a significant price surge.

The last and third Bitcoin halving event occurred in May 2020. As usual, the Bitcoin block reward was further reduced by half to 6.25 BTC. As anticipated from the previous two Bitcoin halving events, Bitcoin value rose from $8,000 during the halving event to the next all-time high value of $68,000 in November 2023. Likewise, all the three Bitcoin halving events have had a considerable impact on the Bitcoin price, along with other factors.

This year, the fourth Bitcoin Halving event is estimated to take place in the next couple of days. Several reputed platforms such as CoinMarketCap are predicting that the upcoming Bitcoin Halving event could take place on April 19, 2024. Even though we can draw the Bitcoin price prediction values based on the previous Bitcoin Halving, several factors make the upcoming Bitcoin Halving event different from the previous ones.

How To Trade During Bitcoin Halving?

Considering the significant changes Bitcoin halving brings into not only the price of Bitcoin but also in the overall crypto market, it is essential to have a proper understanding and strategy on how to trade Bitcoin during these times. In a broader sense, Bitcoin has already proven to be one of the best investment instruments with its long-term upward price movement. So, it is always advisable to buy Bitcoin before halving to benefit when its price increases after the halving event.

2 Factors To Consider For Trading During Bitcoin Halving

When it comes to the time of the halving event, it can be confusing to decide whether to invest in Bitcoin or wait for its price to further reduce before the halving event. In order for traders to know how to trade during Bitcoin halving, it is important to consider the following two factors.

1. Market Volatility

The anticipation of price increase after the halving event and the occurrence of the event itself brings volatility in the market price of Bitcoin. Based on the 5 phases of Bitcoin Halving, Bitcoin price rises and drops in line with the investor sentiment. This volatility during the event can be both a challenge and an opportunity based on how investors play with price trends. While it is not recommended for new traders to make risky bets during this time, experienced traders can properly navigate these times to make returns.

It is also essential to keep a close eye on the popular trend lines such as the support and resistance level. When there is a price breakout, it will be a turning point of Bitcoin price to take a new turn and also an opportunity to either enter or exit the market. Since we are talking about the times of the Bitcoin halving event, having a strong command over technical analysis also helps investors make accurate predictions.

2. Risk Assessment

No matter whether it is the Bitcoin Halving event or regular crypto market, it is always important to perform a thorough risk assessment before investing in any cryptocurrency or any other investment instruments.

While Bitcoin halving events became widely popular for increasing Bitcoin price, it doesn’t happen overnight. The timing and market conditions vary to a great extent for Bitcoin’s price to increase after the halving event. Additionally, Bitcoin’s price can be more volatile during Bitcoin Halving than normal times because of investor sentiments, global economic factors, regulatory developments, etc. As a result, it can be risky to take huge bets on Bitcoin around these times. Investors should cautiously proceed during the Bitcoin Halving event and should not make investments beyond their risk tolerance.