How to capitalize on halving Bitcoin
The next Bitcoin halving will happen in April. Based on historical trends, Bitcoin (BTC) often experiences significant price fluctuations before and after a halving event. However, despite volatility, there are investment opportunities, and performing technical analysis can help traders make investment decisions around the Bitcoin halving event.
This article highlights some strategic investment opportunities employed by traders during past Bitcoin halving events. However, remember that all investments involve some level of risk, so engage in extensive investor education before trying these Bitcoin investment strategies.
Strategies to capitalize on the Bitcoin Halving
The following sections will go into the strategies for capitalizing on the Bitcoin halving event.
Timing the market
The strategy is based on the principle of “buy the rumor, sell the news”. Investors follow market news and sentiment to understand market dynamics, conduct market analysis, and take action when spotting trading signals. However, this is one of the most challenging ways to capitalize on the Bitcoin halving because an investor's timing must be on point, which is rare.
Bitcoin halving events have historically had a positive impact on Bitcoin prices, setting bullish trends. Half events often result in bright market sentiment, which leads to higher runs before and after runs. The planned shortage in the supply of Bitcoin increases the demand, driving the value upwards. However, historical price increases after the 2024 halving are no guarantee of the same. Always do your own research to better understand price trends.
Short term and long term investment plan
To develop trading techniques, a trader must assess their risk exposure and plan their investment goals. This depends on whether a trader is using Bitcoin as a store of value or using recurring price fluctuations to make profitable decisions. Once an investor understands their risk appetite and investment horizon, they can design a short- or long-term strategy:
Short term trading
Traders following this strategy capitalize on regular price movements to make short-term profits. It requires detailed technical analysis and adopting sound trading strategies to pull it off. They also monitor price movements, identify trends and set entry and exit points.
Long term strategy
This is also known as the buy-and-hold (hoddle) strategy. In the year While there is no guarantee that the price will rise after the halving event of 2024, past events have shown Bitcoin prices rising after a few months or years, each time reaching a significant peak.
Dollar value average
Using the Dollar Cost Averaging DCA strategy means investing a certain amount of money consistently and periodically, regardless of the current price of Bitcoin at these intervals. The strategy aims to reduce the impact of market volatility by spreading the investment over time.
DCA has proven to be a strong strategy for other investors during times of high price volatility, so it can work during high volatility during Bitcoin's halving (which has historically led to high price moves). It takes the pressure off trying to time the market correctly.
In addition, the DCA strategy helps smooth out short-term price fluctuations by accumulating bitcoins over time. This allows investors to average the price base to reap long-term returns.
A diverse portfolio
One of the main investment strategies is diversifying portfolios, aligning with investments, “don't put all your eggs in one basket.” This allows investors to spread their risk by investing in different assets, reducing the impact of underperforming investments.
While BTC may be the primary investment asset, a trader can use other cryptocurrency opportunities in a balanced portfolio. For example, if the price of Bitcoin rises, a Bitcoin owner can sell some BTC and invest in other cryptocurrencies or traditional asset investment avenues to increase their investment portfolio.
As always, investors should conduct fundamental analysis of all potential investment properties before making any decisions.
Bitcoin derivatives trading
A derivative is a contract between a trader and another party, with Bitcoin as the underlying asset that sets the price of the derivative. Focusing on halving events in Bitcoin derivatives trading often involves taking advantage of the volatility and market speculation associated with these periods.
Traders rely on the contracts to set up the speculation contract as they fight over Bitcoin's future price movements, hoping to win if they bet correctly. You may engage in derivative trading by trading as hedges from long positions. That is, they expect the price of Bitcoin to increase. Derivative trading can help cover some of the losses if the price of Bitcoin does not increase over a given period of time.
Here's how trailers use derivatives when halving Bitcoin:
Options
Under an options contract, the trader has the right to buy bitcoins at a certain amount (strike price) within a certain period of time or at the end. The contract does not oblige you to purchase the original property.
Given the high volatility that usually occurs during halving events, traders can use options to buy or sell Bitcoin. For example, a trader may purchase call options prior to the Bitcoin halving event if they believe that the Bitcoin halving will increase the price of Bitcoin because the supply of BTC will decrease. Conversely, a trader may buy options if he anticipates a decline in price due to short selling or a market correction.
in the future
Holding futures contracts allows the trader to buy or sell Bitcoin at an agreed price on a certain date. Unlike options contracts, they are obligated to buy or sell the contract in the future. Traders may enter into a futures contract to speculate or speculate after a bearish price movement.
For example, to lock in a price to buy or sell BTC at a later date, perhaps around the halfway point, traders may choose to enter into a futures contract. If the trader believes that the price will rise after the halving, he may enter into a long-term contract. On the other hand, a short-term contract can be useful if you anticipate a decrease in prices.
Permanent contracts
Also known as perpetual swaps/futures contracts, these are the cryptocurrency equivalent of traditional financial contract variants. The main difference is that unlike futures and options contracts, perpetual contracts do not have an expiration date. A trader can hold the position as long as he is able to pay the financing or holding fee.
There is usually a difference between the index price and the perpetual contract price because the price of Bitcoin changes often during the halving period. If the price of the perpetual contract is higher than the index, those holding the long position generally cover the price difference by paying the amount in cash. Similarly, if the price of the perpetual contract is lower than the index, the “short” traders will pay the amount to cover the difference.
The incidence of perpetual contracts is halved because they never expire and allow traders to hold long or short positions forever. If traders believe that halving will result in a permanent increase in prices, it can be extended for a long time; If you think there will be a decline or more volatility, you can go short.
Risk Management Strategies for Navigating Bitcoin Volatility
The golden rule of investing is that traders should only invest what they can afford to lose. This is especially true considering the volatility of Bitcoin. There's no telling which way Bitcoin's price will swing, regardless of historical price increases after a halving, so a good halving strategy should include setting a stop order. The order will sell the asset when the price falls below the investor's expectations, thereby stopping excessive losses.
At the opposite end of the stop-loss order is a take-profit order. The volatility of Bitcoin price means that if a trader does not trade actively, it will crash as soon as it starts. To take profit, traders can set a take profit order which triggers the sale of an asset immediately after the price reaches a predetermined desired level.
The ultimate goal of the above strategies is to secure profits in a volatile market while protecting assets from catastrophic losses. However, regardless of the event, investors should assess their risk exposure and balance investments with their financial goals.
This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.
