With Bitcoin spot ETF approved, investors are eyeing two major events – BTC’s fourth halving and Ethereum’s spot ETF approval. While the latter will take time, considering the US Securities and Exchange Commission’s (SEC) on-the-fence stance regarding the classification of ETH. So, in this newsletter, let’s take a look at Bitcoin halving and how it affects price.
The macroeconomic market is going to be silent, but with the launch of new crypto tokens, the volatility is extremely high, and altcoins seem to be highly wound.
So the focus for day traders should be on
While the short-term narrative-based plays are interesting, investors need to focus on the most anticipated event of the year – Bitcoin halving.
Read more: Bitcoin whales rise in numbers signaling strong confidence in BTC rally or positioning for profit taking
Bitcoin blockchain’s rewards are halved once every four years or after 210,000 blocks are mined. So far, BTC has undergone three halvings, reducing its block reward from 50 to 6.25 BTC. The fourth halving is estimated to occur on April 24, 2024, which would further slash the miner reward per block to 3.125 BTC.
Due to the anticipation of this negative supply shock event, investors generally invest ahead of the halving, causing a massive price rally. Considering that BTC ended its bear market in 2023 and has kickstarted a bull run, the halving event is likely going to catapult the pioneer crypto to extend its rally.
A negative supply shock, simply put, is when the demand remains the same or increases, but the supply is reduced. This causes the underlying asset’s demand, aka market value, to surge.
Comparing the last three halvings gives investors a good idea of what to expect, although the past performance does not guarantee future returns. For this experiment, I will be comparing the BTC price action of the halving year.
As seen in the below chart, the first halving for BTC took place on November 28, 2012, and the start of 2012 saw Bitcoin price crash in the first half but continued to rally even after halving.
The second halving was on July 9, 2016, and the start of this year also saw a steep correction but was eventually followed by a swift uptrend that formed a top three weeks before the halving. The correction continued roughly for another three weeks, after which Bitcoin price continued its uptrend.
The third halving was similar to the first halving, where Bitcoin price crashed in the first half, albeit this was caused by the pandemic. Regardless, BTC saw a positive close to the year with remarkable performance.
BTC/USD 1-day chart
With this information, one can expect a crude crash in the first two quarters of 2024, following which the pioneer crypto is likely to continue its 2023 bull rally. If not a steep correction, at least a sideways movement in Bitcoin price two-to-four weeks before and after the halving.
If history were to repeat itself, although it doesn’t, and we get a similar performance to
As always, this forecast has to be taken with a grain of salt.