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To what extent is Bitcoin still following the BTC halving strategy?

So far, 2022 has proven to be a disaster year for Bitcoin. As of Jan. 1, the currency lost 65% in value. Yet many experts assume that this loss will be offset by gains leading up to the next Bitcoin halving (scheduled for 2024). They base this on the Bitcoin halving strategy. However, the question is to what extent it is still current. We analyze.

What is the Bitcoin halving cycle strategy?

As part of the Bitcoin white paper, Satoshi Nakamoto determined that the reward for mining a Bitcoin will be halved every 4 years. We have since experienced 3 of these halves (in 2012, 2016 and 2020). In the first 2 cycles, the price of Bitcoin was found to follow a similar pattern in the 4 years between one halving and the next. Based on these price patterns, experts distilled 3 golden rules and 5 technical indicators. You can find these in a good analysis of the Bitcoin halving cycle strategy.

The question now is whether in the current market conditions this strategy still provides enough guidance for your crypto investments for 2023 and early 2024 (the next halving will take place around March 20, 2024).

Bitcoin crypto cryptocoins crypto exchanges cryptocurrencyCrypto (Image: Pexels / Karolina Grabowska)

Golden rule BTC halving strategy broken

One of the golden rules is that the Bitcoin price in a halving cycle can never fall below the top of the previous halving cycle. This rule has been broken. This happened for the first time on June 18, 2022. By the way, this is not as bad as it sounds.

In fact, one of the technical indicators is that the bottom of the Bitcoin price in a halving cycle would be around 85% below the previous peak. To touch this technical indicator, the bottom must be around $13,809. So this is below the peak of the previous halving anyway.

Other conditions BTC halving strategy under pressure

More worryingly, the other two golden rules and two of the five technical indicators are under pressure. For example, according to the technical indicators, a rebound to 20% of the ATH price should take place. Then another drop to 70% below the ATH should take place, after which the price should drop to the bottom. That bottom should be reached in the bearish year, which should end in late 2022 or early 2023.

Specifically, this would mean that in the next few months we should see a recovery of the Bitcoin price to $55,236 and then a fall back to $13,809.

Looking at the live BTC price at the time of writing ($16,935.50) and considering that the market is very uncertain, a short-term price rise to $55,236 seems only a theoretical possibility. Moreover, many investors who did not exit after the all-time-high will still try to take profits. If such a price rise does occur, it is unrealistic to expect that the stock price would then fall over $40,000 in a few months.

With that, we can conclude that you cannot rely too much on the Bitcoin halving strategy when putting together your investment strategy.

Only in hindsight can we determine the basis for new strategies for the future. Analysts expect that we should take into account three factors that will determine the price development towards the next halving.

Jack Dorsey BitcoinThe CEO of Square and Twitter (Image: Marco Bello / AFP)

These 3 factors will determine Bitcoin price towards halving

In analysts’ estimation, the following factors will play a role toward the next halving:

FED interest rate decisions;
A longer bear phase;
New crypto regulations.

We briefly explain these.

The impact of FED interest rate decisions on the BTC rate

FED interest rate decisions can affect the market. In advance, analysts estimate whether there is an interest rate measure and how big it is. When the FED raises interest rates to curb inflation it often has a bear effect on crypto prices. When it then turns out that interest rates are raised further than the market had estimated, the reaction is often a further wave of selling. Analysts anticipate that the market will not calm down until the Fed stops raising interest rates. Currently, they believe this will be the case in late 2023, early 2024.

A longer bear phase for the Bitcoin price

People are talking about a one-year bear phase in the Bitcoin halving strategy. With the bankruptcy of FTX still lingering, many analysts expect the bear phase in the market to last longer and the price to fall further than we have seen so far. For example, crypto analyst Mark Mobius thinks the price of Bitcoin could fall to $10,000 next year. Now Mobius is known as a cryptocritic, but he did correctly predict the fall to $20,000 earlier this year, so he is definitely someone to be reckoned with.

New regulations bring uncertainty to crypto market

Both Europe and America are making regulations for investing and trading in crypto. This development was already making investors nervous. Now, with FTX revealing a textbook example of what can go wrong if trading is not done cleanly, investors are afraid that regulations will become much stricter than thought. Scared investors are not investing.

A situation in which the crypto market remains bearish until just before or perhaps even after the 2024 halving is therefore not ruled out. If this is the case, only one piece of advice applies. Being cautious and good risk management is then recommended.

Stay up to date on the latest stock price developments?

You can always follow the developments yourself with our WANT analyses and overviews. Of course, you can also follow the BTC and live cryptocurrencies 24 hours a day if you want to stay informed in real time. Finally, you can practice stock and crypto investing without financial risk by creating a free account on virtualinvestment.com.

Note: We never give financial advice, so you can’t interpret our contributions that way either. Always do your own research and decide rationally if, when, what and how much you want to invest.