• 15 June, 2024

Bitcoin halving holds significant importance in the crypto world as it directly impacts the supply of Bitcoins and has the potential to influence the border cryptocurrency market. As the Bitcoin halving event approaches, the entire crypto community is buzzing with excitement. This event unfolds in multiple phases, and this article will provide you with a comprehensive overview of each phase.  

What is Bitcoin Halving?

Bitcoin halving is an event that occurs whenever 210,000 Bitcoin blocks have been mined. This event usually happens approximately every four years, and during this event, the mining rewards for Bitcoin will be halved. This means the amount of new Bitcoin released into circulation will be reduced by half. The main reason for Bitcoin halving is to control the supply of Bitcoins so that it can prevent inflation and maintain the increase in the price of coins at a steady pace.   

Mining a Bitcoin block usually takes 10 minutes. The number of Bitcoins stored in a block will continue decreasing every four years until the maximum supply of 21 million Bitcoins has been generated. The more scarce an item is, the more its value goes up; likewise, as the number of bitcoins inches down to the maximum supply, the more its value skyrockets.   

Effects of Bitcoin Halving on Mining

While Bitcoin halving reduces the number of coins mined by half, it doesn’t necessarily translate to reduced earnings for miners. Despite the halved reward, the potential rise in Bitcoin’s value can lead to profits. However, sustaining profitability requires miners to invest in new mining equipment and other hardware to enhance efficiency and minimize electricity. 

What Are The Global Impacts Caused by Bitcoin Halving?

  • Following Bitcoin’s halving, the market volatility typically escalates. This attracts a large influx of new investors eager to capitalize on the emerging opportunities. 
  • The rising prices of Bitcoin post-halving, along with the heightened media coverage, can lead to increased adoption of cryptocurrencies.
  • As the foremost cryptocurrency in terms of price, market capitalization, and age, Bitcoin’s trends have the potential to shape market dynamics for other cryptocurrencies.  

Phases of Bitcoin Halving

1. Pre-Halving Downside

The pre-halving downside represents a period before the Bitcoin halving, during which the price of BTC goes down, and price corrections or movements occur. During this phase, keeping a close eye on the weekly candle charts is important because as the downward trend reaches the highest point, the transition from bearish to bullish momentum occurs, accompanied by a shift in market sentiment.  

2. Pre-Halving Rally

The pre-halving rally usually happens two months prior to the Bitcoin halving event and is accompanied by a surge in BTC’s price as investors anticipate the upcoming event. The massive surge in prices is due to the ‘hype’ surrounding Bitcoin halving. Investors tend to capitalize on the hype by buying Bitcoin before the halving event and selling it after the price increase. This type of strategy is called “Buy The Hype, Sell The News” and is followed by a pre-halving retrace where there is a temporary dip in prices.  

3. Pre-Halving Retrace

The pre-halving retrace occurs a few weeks prior to the Bitcoin halving event, and this phase is marked by a temporary dip in the Bitcoin price. Based on historical data, the pre-halving retrace was -38% in the year 2016 and -20 in 2020. Savvy investors view this decline as a potential entry point. This retracement phase typically lasts for several weeks and prompts speculation among investors regarding the potential positive impact of the halving event on the Bitcoin price.      

4. Re-Accumulation

After the retracement phase, Bitcoins enter a new phase called the Re-accumulation. Unlike other phases, this period can span up to 5 months or 150 days. During this time, the Bitcoin price tends to enter a period of stability and sideways movement. The prolonged absence of significant growth might cause investors to experience boredom and disappointment due to the lack of movement and may exit their positions prematurely.  

5. Parabolic Uptrend

During the last phase of Bitcoin halving, known as the Parabolic Uptrend, there is a breakout from the previous consolidation phase to a rapid surge in values. Driven by FOMO (fear of missing out) and upward momentum, Bitcoin prices are poised for a significant increase, potentially reaching new record highs. For investors, this phase is marked by excitement and optimism as coin prices soar, showcasing strong bullish momentum.       

Conclusion

The various phases of Bitcoin halving offer insights into cryptocurrency market dynamics. Successfully navigating these phases and capitalizing on the benefits requires a strategic approach. With the forthcoming Bitcoin halving in April 2024, investors should brace themselves for the impact.

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