Bitcoin halving is scheduled to take place in 2020 and from the previous effects, investors should get ready for another insane bull run.
In economics, the direction of the price of an asset is largely dependent on the action of its price determinants. In other words, the price of an assets in the world of investment is usually attributed to the action of one or more price determinants.
This article will walk you through few reasons why Bitcoin is still in the phase of preparation to trade above its all time high.
Let me brief you on the Bitcoin Halving.
Bitcoin halving is an occasional event that split the Bitcoin reward by 50%. The first Bitcoin halving occurred in 2012. Before this event, the Bitcoin reward was 50 BTC. After the event, miners started receiving 25 BTC as reward. The next halving event took place in 2016.
The Bitcoin reward underwent another split which saw miners receiving 12.5 BTC as reward. The next event will take place in 2020 which will see miners earning 6.25 BTC as rewards. In Summary, Bitcoin halving occurred in 2012, 2016, and the next one is 2020.
From this break down, we can observe that Bitcoin halving occurs in every four years. Technically, it occurs after every 210,000 blocks are mined.
In technical analysis, we understand that the prices of Bitcoin can be predicted by observing and analyzing charts and patterns or historical price behavior. On this note, we can predict what will happen to the Bitcoin price before and after this memorable event based on what happened in previous occasions.
Lets Get Started
In 2013, Bitcoin recorded one of its all time high price of above $1000. On December 2017, Bitcoin recorded its all time high of near $20,000. In late 2020 or 2021, Bitcoin will possibly hit another all-time high. Do you get my point? I guess no. I might be confusing you, but don’t worry. Lets tackle this once and for all.
After the first ever halving event in 2012, Bitcoin went ahead to record a price as high as $1000 and that was the first time it ever tasted that price point. After the 2016 halving event, Bitcoin went ahead to hit $2,525 from $268 and later recorded an all time high price of near $20,000 in December 2017. What does this mean? Anytime this event occurs, Bitcoin undertake an insane price bull run at most a year after the halving.
According to Glen Goodman, Bitcoin analysts and author, previous halving have shown a negligible impact on Bitcoin’s price. “Previous halving’s have shown negligible impact on Bitcoin’s price,” he said. “This is because, rather like a much anticipated interest rate cut, everybody already knows it’s going to happen way in advance,” he added.
The reason behind the Bitcoin price surge after each halving event is actually unknown, but it is believed that the big whales in the market buy more before the event which in turn cause the market price to rise. Months after causing the bull run, they step out of the market and this causes the market pullbacks. It is worth to understand that big whales are people who hold a large amount of Bitcoin and can determine the direction of the price.
The Effect of Anticipation of Bitcoin Price Surge after Halving
In economics, one of the price determinants of a commodity is the anticipation of a future price increase or decrease. It is possible that the investors will buy more at this period as they wait for a bull run after the much-anticipated Bitcoin halving, and the rise in demand will cause the price to increase as we are experiencing.
So What Happens after the Bitcoin Halving?
Two things happen after Bitcoin halving.
1. The price will take an insane rise as we experienced in the two previous halving: Bitcoin recorded a double all time high of $1000 and near $20000 after each previous Bitcoin halving.
2. The price will take a deep fall after each bull run: After Bitcoin recorded a little over $2000 after its first halving, the price crashed by 80% to trade as low as $200 before surging again. After the 2017 market bull run, Bitcoin experienced a severe market pull back making the digital asset to trade below $4000 soon after recording its all time high.
From the above observation, it is important for investors to plan well if they seek to take advantage of the halving event. Investors should know when to exit the market after the bull run that follows the event to avoid running into another massive market pull back.
Also, investors should understand that nothing is certain in the world of cryptocurrency. The price is affected by the interplay of multiple factors and the more dominant factor succeed in dictating the direction of the price. Dominant negative factors can equally cause the price to fall contrary to what we expect.
Other than the halving, the cryptocurrency is expected to pull a surprise in response to its massive adoption rate. Cryptocurrency Cafe has been opened in U.S coupled with bitcoin transaction made possible on WhatsApp and this signifies a good adoption rate which may trigger the price sooner or later.