As we approach the 4th halving of Bitcoin that is happening every 4 years approximately, it’s the right time to explain what it is and what it means for you as an investor.
What is Bitcoin halving?
After every 210,000 blocks, Bitcoin goes through a process called “halving.” … After a protocol goes through “halving,” it cuts the supply of new Bitcoins in half, halving the miner’s block production rewards, as well.
This simply means that the ‘’ mining’’ (creation of new coins) is becoming harder and harder. This gives Bitcoin it’s status as a finite source like gold in this regard making it a potential store of value and sound money. Every halving has a low and a high in the price of Bitcoin as shown in the graph below, which many use to predict the future of the price of Bitcoin.
How Bitcoin halving impacts you and your investments?
As mentioned above a lot of people use the halving to predict the future of the price of Bitcoin. In simple words, it makes sense that if you make something rarer or harder to create that the price will go up. But we must be careful when it comes to listening to predictions as we have been always pointing out!
It is true that if you have long term investment interests that you will probably benefit, but the majority of the investors usually lose patience and they either move in and out of their investments or they sell when the price starts to fall. It’s crucially important that you understand the trends and that you do your own homework when it comes to investing in cryptocurrencies.
One important thing to mention is also that every bull market(trend of price goes up) as shown on the picture above is also followed by a bear market(trend of price going down), meaning that there will be depreciation of the value of Bitcoin in that period and those can be quite big considering we are part of a very volatile market.
What usually happens within a cycle from one halving to another?
- Bitcoin halving has been an important catalyst that brings about a new bull market for Bitcoin.
- Bitcoin tends to start its new bull trend about a year before the halving.
- Bitcoin enters an extended bull market after each halving, which lasts for at least a year.
- A retrace follows after a new market cycle high is set. These retrace last, on average, at least 1 year. Bitcoin also loses at least 80% of its value during these retraces/bear markets.
- Bitcoin reaches a new all-time high after every halving, but it takes several months after the Halving for such to be reached (at least 1 year).
- Bitcoin rallies at least 3000% after each of its halving dates.
What to do with the information about Bitcoin halving?
If you want to make the best of your investment you must still be careful as to when you invest, who you trust your funds with and how often you move in and out of the market. Although halving brings an opportunity for investors you also have to bear in mind that bitcoin loses 80% of its value somewhere trough the cycle and if you are not smartly tackling that position it might take you a lot more time to break even then it is to lose your value. The worst that can happen is that you lose faith in the whole market and abandon it.
That’s why you should do the following :
- Invest long term
- Educate yourself about cycles and trends
- Find someone you can trust your funds with for management