Bitcoin halving cycle, occurring approximately every four years, significantly impacts its price movement. The third halving (May 11, 2020) and fourth halving (April 20, 2024) demonstrate this influence. Historically, Bitcoin’s price surges after halving, with the 2020 event sparking a parabolic increase 160 days later.
Despite initial differences, the 2024 cycle shows similarities with the 2020 cycle, including a potential reversal of the downtrend in August 2024. With 151 days passed since the fourth halving, analysts suggest history may repeat itself, potentially triggering an upward movement around 161 days after the halving, based on past patterns.
Understanding the potential market impact of Bitcoin halving cycle is necessary for investors, traders, and market participants seeking to capitalize on emerging trends. The halving event, has historically had significant effects on bitcoin price and market dynamics.
Recognizing the potential market implications enables investors to make informed decisions, minimize risks, and maximize returns. This article evaluates the probability of a month-end Bitcoin surge induced by the halving event.
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Background: Understanding Bitcoin Halving
Bitcoin halving is a fundamental mechanism within the Bitcoin network that occurs approximately every four years, as earlier mentioned. This process involves reducing the block reward, which is the number of new Bitcoins awarded to miners for validating transactions and creating new blocks.
The Bitcoin halving has a great impact on supply and demand dynamics. By reducing the block reward, the halving event decreases the supply of new Bitcoins entering the market. This reduction in supply, coupled with consistent or increasing demand, creates upward pressure on Bitcoin’s price.
Historically, bitcoin price has surged following halving events, as the decreased supply and maintained demand drive market sentiment. The halving mechanism also incentivizes miners to focus on transaction fees rather than block rewards, further solidifying the network’s security and decentralization.
As the fourth halving has occurred, understanding the implications of this event on supply and demand dynamics becomes important for investors, traders, and market participants seeking to navigate the evolving cryptocurrency landscape.
Historical data provides valuable insights into the market impact of Bitcoin halving cycle. The 2012 halving saw Bitcoin price surge 7,976% in the year following the event. Similarly, the 2016 halving resulted in a 288% price increase in the subsequent 12 months. The 2020 halving saw a 300% price appreciation in the year that followed. These patterns therefore, suggest that understanding the halving cycle’s market implications can help investors capitalize on emerging opportunities
Read also: The ‘Tug-o-War’ on Exchanges: A Technical Analysis of Bitcoin Price Action
Evaluating Probability of a Month-end Surge
Bitcoin crossed the $62,000 mark after the U.S. Federal Reserve announced a 50 basis point interest rate cut on Wednesday. This is the first time in years that the central bank has lowered its benchmark interest rate, aiming to prevent a slowdown in the labor market. While some investors expected a smaller cut of 25 basis points, the larger reduction caught the attention of the markets, pushing Bitcoin and other cryptocurrencies higher.
Interest rate decisions, especially cuts, are closely watched by cryptocurrency investors. Bitcoin, often viewed as a risk-on asset, tends to rise when monetary policy becomes more lenient. A rate cut generally signals a looser financial environment, encouraging investment into assets that thrive in higher-risk settings. With borrowing costs lowered, investors look for opportunities that could offer higher returns, and Bitcoin often fits the bill.
Following the rate cut, bitcoin has climbed to $62,129, reflecting a 7.26% gain over the past week, according to CoinGecko. Ether, another top cryptocurrency, also saw gains, rising above $2,400. Both assets benefited from the perception that monetary easing could continue, with the Fed potentially making further cuts before the year’s end, as suggested by the CME Group’s FedWatch Tool.
In addition to the Fed’s influence, on-chain data provides further insight into Bitcoin’s recent price action. According to IntoTheBlock, Bitcoin saw $1.29 billion in net outflows from centralized exchanges (CEXs) over the past week. This is a strong indicator that investors are accumulating Bitcoin, moving their holdings off exchanges and into private wallets.
September 10 was a significant date, with 12,420 BTC leaving exchanges as the price struggled to stay above $57,000. Typically, such large withdrawals suggest that investors expect the price to rise, and they are less likely to sell in the short term.
However, the price movement has not been without its fluctuations. On September 13, large holders (often referred to as “whales”) began to take profits as Bitcoin’s price touched $60,000, after falling to a recent low of $52,600. This led to a net outflow of 9,180 BTC back onto exchanges, causing some volatility and driving the price briefly below the $60,000 mark.
At its current price of $62,129, bitcoin is showing strength. The next key resistance level stands at $65,000, a point where traders might expect some selling pressure. If bitcoin can break through this level, it could lead to further gains. On the other hand, bitcoin now finds support around the $60,000 mark, meaning if the price falls below this threshold, it could trigger more selling.
Read also: After the Fourth Halving: Why Bitcoin price is not skyrocketing (yet)
Bitcoin’s Relative Strength Index (RSI) currently sits at 54, indicating that the asset is neither overbought nor oversold. This neutral positioning suggests there is still room for price movement, but it could go either way depending on market sentiment and future economic developments.
However, recent developments contribute to the optimistic outlook. MicroStrategy’s private offering of $700 million in notes to purchase more Bitcoin adds to its existing $14 billion holdings. Furthermore, data from Arkham Intelligence reveals the Kingdom of Bhutan now holds approximately $750 million in Bitcoin following a recent purchase.
Investing in Bitcoin comes with inherent risks and uncertainties that must be carefully considered. Volatility and market unpredictability are paramount concerns, as Bitcoin’s value can fluctuate rapidly and unpredictably. This volatility can result in significant losses, making it essential for investors to be prepared for potential price swings.
Read also: How far could bitcoin go after the coming halving?
