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| By Bruce Ng |
Have you set your calendar yet?
The next Bitcoin (BTC, “A”) halving is estimated to occur on April 20. That’s in just four days.
The halving, which takes place every four years, cuts the BTC reward that miners get for validating a block on the blockchain. In effect, it cuts the production of new BTC in half.
That’s why it’s usually a bullish event — a cut in supply could drive prices higher.
And it’s why we’re eagerly anticipating this halving, as demand for BTC has skyrocketed thanks to institutional interest from the new spot exchange-traded funds.
But that’s the big picture.
In the near term, the halving tends to stir up a whirlpool of volatility. And even seasoned traders can lose their perspective when caught up in the storm.
The unending speculation from talking heads rarely helps, either.
So today, I want to take the resources we have — the market’s past performance leading up to and following a halving along with recent price action — to see if we can’t get a feel for how this volatility could shake out.
My goal? To help you fight the FUD — fear, uncertainty and doubt — that the volatility will bring.
So, let’s get started with the two most recent halvings.
First up is the 2016 halving. Below is a chart of the price action throughout 2016, with the event itself marked by the vertical red bar …
And here is a chart of BTC’s price over 2020, with that year’s halving also marked by a red bar.
As you can see, the price action before and after each halving is very similar. In fact, they reveal a set pattern:
- First there is a rally before the halving.
- Then, prices dump as we close in on the halving.
- Price then recovers nearly back to pre-halving ATH on the day of the halving itself.
- This is followed by sideways price action for a few months.
- And the final parabolic rally in the fall.
That’s a fair bit of volatility as price trends change like the wind!
And we’re already feeling some of that in this go-around. Take a look at the recent BTC price action …
We’ve already hit the first two steps: a notable rally followed by a downturn.
Now, just because a pattern repeats itself twice in a row, does not mean it will do so again.
But Bitcoin does tend to fall back on its precedents. This history gives us an indication of what to expect and how we can manage risk.
It’s like that famous George Lucas quote about the Star Wars prequels hitting similar themes as the originals: “It’s like poetry, sort it. It rhymes.”
Looking at the table above, BTC dropped 31% in 2016 and 64% in 2020 in the lead up to those respective halvings.
So far, BTC has dropped a much shallower 15% from its recent all-time high. This means a further correction before April 20 cannot be ruled out.
And it’s why you should keep all this in mind.
With the halving being heralded as a bullish event, investors watching the pre-halving dump without knowing the context are that much more vulnerable to FUD and emotional trading.
And that’s never a sound investment strategy.
If BTC does continue to drop, I expect to see strong support at $60,000. That would be just over an 18% drop from its ATH. In other words, still a shallow pullback compared to previous pre-halving drops.
And if $60,000 doesn’t hold? Then I see additional support at $52,000.
Whether this correction continues, halts or reverses, here are three easy steps you can take to manage your risk while navigating this volatility.
- Wait until the halving is over and for price to stabilize before taking on riskier investments, such as altcoins or leveraged positions.
- While there are daily inflows into Bitcoin via the ETFs, I think institutional players are still waiting for halving volatility to play out before positioning in big size. As the saying goes, follow the smart money.
- When it comes to Bitcoin, corrections should be seen as buying opportunities if you’re looking to invest on a longer time frame. That’s because, by looking at the price action in the months following a halving, I expect a gigantic BTC rally in Q4 this year.
Right now, the market is in “hurry up and wait” mode.
It’s tough but keeping your riskier investments on hold until near-term volatility passes, following the smart money and taking the opportunity to get Bitcoin exposure at a discount will likely go a long way in helping you get through the halving without too much trouble.
But while this is not the time to bid on riskier investments, that time is coming soon. And with so many altcoins out there set to explode in altcoin season, it can be hard to pick the ones most likely to outperform.
And just as important as knowing what to buy … is knowing where to buy them.
That’s why my colleague Juan Villaverde released an urgent briefing with Weiss Ratings founder Dr. Martin Weiss. In it, he explains how we target the most promising growth opportunities — what we’re calling “crypto wonders.”
And Juan breaks down the strategy we’ve been using that can turn 2x, 9x and 10x crypto opportunities into 20x, 344x and even 816x winners.
If you’re interested, we’ve made that briefing available to view for free here. But it won’t be online much longer.
Best,
Dr. Bruce Ng
