Since spot bitcoin ETFs were allowed on January 10, the price of bitcoin has increased by 36%. Its cost as of Thursday morning was approximately $62,460.
However, a halving event that is coming up can accelerate that price increase.
The automatic halving procedure commences upon the creation of 210,000 “blocks” in the course of mining bitcoins. This occurs roughly every four years and reduces the payout for mining new bitcoin by half, hence discouraging coin production. The following halving event is anticipated to occur in April of 2020, which was the last one.
The goal of halving is to reduce the amount of coins as they get closer to their maximum, which is 21 million coins. The integrated process makes sure that mining bitcoin is more expensive over time by simulating the shortage of gold.
Supply Down- Price Up
“Prices rise when supply declines, provided that demand stays the same or increases.”
According to CoinDesk, historically, the value of bitcoin has climbed soon after each of its three previous halving events, albeit with decreasing returns with each halving.
Naturally, given the impending halving is well known, the ramifications of bitcoin’s halving may already be factored into the price of the cryptocurrency.
“Though it might already be priced in, the idea is that institutions will need to purchase more bitcoin on the open market to support the flows into their funds now that spot ETFs are available.”
Should you invest in bitcoin?
Similar to all cryptocurrencies, bitcoin is an exceedingly speculative and volatile asset, with price swings of up to 10% in a single day.
Even while bitcoin price fluctuations can be profitable, prior performance does not guarantee future results. Nor is there any assurance that any of its present worth will be retained.
Additionally, bitcoin does not reflect ownership of a tangible object or a claim on future returns, in contrast to conventional investments like stocks or bonds.
Conventional investments, such as S&P 500 index funds, are typically suggested by financial advisers since they are lower risk. Furthermore, the average yearly return of the S&P 500 is higher than 10%.
Having said that, some financial advisors could advise including a tiny investment in bitcoin in a well-rounded investment portfolio. It is still regarded as a high-risk asset, nevertheless.
In summary
Understanding the ramifications of such events is more crucial than ever as the predicted Bitcoin halving in April 2024 draws near. The halving is expected to be a momentous event for Bitcoin in and of itself, as well as a possible spark for larger shifts in the cryptocurrency market. Maintaining an advantage in the cryptocurrency market requires understanding the past effects and becoming ready for halving.
How to prepare for the next halving?
Being ready for the next halving means actively participating in the market, not just watching it happen. To make sure you’re prepared, follow these concrete steps:
- Learn more about the halving by exploring sites that go into great detail. Recognize the “why” as well as the “what” of the procedure.
- Keep an eye on the market: Observe how Bitcoin performs, but also note how other cryptocurrencies react at these times. Examine past cycles’ historical trends.
- Modify your portfolio: Before the halving occurs, think about rebalancing or diversifying it. If past trends continue, volatility may present opportunities for purchases.
- Use a watchlist and set alerts: To ensure that you don’t miss any big price swings, use our easy-to-use features to create a watchlist and establish price alerts.
- Establish a connection with the community: Participate in social media groups and online crypto forums. These can be veritable gold mines for sentiment research and real-time insights.
- Prepare for several outcomes: Consider the potential effects of the halving on the market and adjust your plan of action accordingly.