Is Bitcoin halving period a good time to invest in the crypto asset?

The price action of the world's largest cryptocurrency might also be influenced by unknown and dynamic macroeconomic conditions. 2024 is experiencing more than half of the world population voting to select their respective governments. While this can be one of the influencing aspects for BTC’s price, two major factors will influence the volatility more. One of these factors will be the approval of 11 spot Bitcoin ETFs following prolonged delay, while the other is the arrival time of the ETF - right before the BTC halving event. For the first, the approval has helped establish Bitcoin as a reliable global asset class. The approved ETFs are accumulating 30% of the cryptocurrency’s total capital inflow till March 13 - more than $2 billion in worth. For the second, the halving event will diminish Bitcoin’s global supply, leading to a reduction in mining yields from 900 to almost half of the previous levels. While halving events have a positive effect on the price action of the cryptocurrency, the upcoming event is being projected as additionally pivotal in the history of the virtual digital asset.

Additionally, the reduced supply becomes a driving factor for price surges, especially during breakouts that follow the halving event in three parts - breakout, distribution and accumulation. When the supply is lacking but the demand persists, the price tends to surge upwards as the existing Bitcoins turn expensive. On the other hand, the lack of supply also highlights Bitcoin and the general asset class, resulting in more capital inflows. Experts suggest that these cycles establish aspirations for investors that work as a positive feedback loop, however, the ROI might not match the previous all-time highs of the past primarily because of the VDA’s enhanced market capitalization. However, investors must consider the fact that the halving event in April 2024 will have significant participation of institutionalised investors and capital from ETFs.

While Bitcoin has been known widely for its rapidly changing market dynamics for a long time, this paradigm shift might lead to new behaviour by the cryptocurrency and contribute to a new tier of complexity and additional demand. Some analysts are projecting that while Bitcoin halving events have led to the cryptocurrency establishing new all-time high levels, the scenario might be different this year. These projections are based on the continuous outflow of capital from gold and other valuable commodities that are being invested in Bitcoin ETFs at an unprecedented rate. This means that the recognition of Bitcoin as an asset class has been enhanced, which has led more retail investors to purchase the cryptocurrency, while there is a dearth of availability. There have been predictions that this has resulted in Bitcoin reaching all-time high levels before the halving event, unlike the previous events where it happened later. If the prediction comes to reality, this will mean that the entry stage has already been surpassed and for retail investors, there will not be any significant profit going forward.

However, there are different opinions as well. Some experts believe that Bitcoin remains underappreciated at the moment and will soon cross the $100,000 level, creating a new all-time high following the halving event. These predictions also say that to reach this record level, considerable volatility will be involved but the investors need not lose patience. This speaks volumes of the impact of the halving event in 2024, all of which presently depend on particular aspects.

(The author is Co-founder and CEO of GoSats)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)

Source: Forex-Markets-Economic Times