Bitcoin halving takes place approximately every four years. Investors can take advantage of this event, regardless of whether they are convinced of Bitcoin or not. Because every four years there is a similar price pattern. So what investors should pay attention to and how the Bitcoin halving strategy works, we’ll reveal now.
What is the Bitcoin Halving?
The so-called halving of the Bitcoin blockchain takes place approximately every four years. It can roughly be translated as “halving”. Because on this date, the amount of newly distributed Bitcoin changes for the next four years. In order to operate the blockchain, miners have to run their servers with the Bitcoin code. That requires investments in hardware and electricity. So that the miners have an incentive to operate the Bitcoin blockchain despite the costs, the blockchain rewards the miner who finds the latest block and adds it to the blockchain with a fixed amount of Bitcoin. This happens about every ten minutes. Initially, there were 50 new Bitcoin every ten minutes. After the first halving in 2012 there were 25, after the second in 2016 12.5 and since the third halving in 2020 there are currently still 6.25 Bitcoin, which are distributed to the miners approximately every ten minutes.
It has now been shown in the past that these halvings had a huge impact on the price. On the one hand, this can be explained by the increased media attention around these dates and, on the other hand, there is simply 50 percent less new Bitcoin in one fell swoop. The miners have to sell many of the new Bitcoin directly on the market to cover their hardware and power costs. But if you only get half, you can only sell a maximum of half after halving. Halving automatically ensures that there is less pressure to sell on the market. As a result, the market usually rises because demand remains the same and even increases. If the demand does not grow and decrease, the price would not necessarily have to rise after a halving.
How have the Halvings gone so far?
In this picture we have marked the halvings and put a second line exactly one year after the halving. What is striking? After the first halving, it took almost exactly a year for Bitcoin to hit its record high. After that it went downhill. The second time it went briefly downhill after a year, but then the bull market continued for about six months. And even now with the third halving, the course turned down almost exactly a year after the halving. We cannot yet say whether the course will only go down like after the first halving, whether it will catch up again and go up for another six months, like after the second halving, or whether it will catch up again and maybe 12 more Months up? We do not know it. But we know one thing: So far, a Bitcoin halving strategy has always worked. And this is how it works:
The Bitcoin Halving Strategy
You invest on the day of the halving and sell your position exactly 365 days after the halving. So far, this strategy has brought the following results after the three halvings:
- The purchase on November 28, 2012 at a rate of USD 12.13 per Bitcoin brought a return of 7,813 percent in the following 365 days
- The purchase on June 9, 2016 at a rate of USD 584.41 per Bitcoin brought 381 percent profit in the following year.
- And the purchase on May 11, 2020 at a rate of $ 8,738 per Bitcoin brought a return of 320 percent by May 2021.
There will probably no longer be returns like 2012/2013 with Bitcoin. But with the second and third halving, the gains were similar at 381 and 320 percent. In such magnitudes, maybe a little more, maybe a little less, you can probably count on the next halving. So far, the Bitcoin halving strategy has brought good profits. Investors can buy the coins directly from a crypto exchange. Or they invest in securities from different issuers.
Conclusion on the Bitcoin halving strategy
In doing so, however, the risk must always be taken into account: Just because the strategy has worked so far doesn’t mean it has to do it every time. Investors should definitely not go all-in with this strategy. With a small percentage of your portfolio you can test it out and try to ignite the turbo-return. Disadvantage: The next halving is not on the program until spring 2024. Nevertheless, interested parties can still take advantage of these considerations.
In addition, the Bitcoin Halving strategy reveals in reverse that after a certain period of time in which the price always rose, the price fell again for a long time. Investors can also take advantage of this knowledge and enter the market with the Bitcoin Cost Average method when the prices are no longer that high and they are convinced of the Bitcoin. Thus, the Bitcoin Halving strategy offers two possible approaches to successfully trade with cryptocurrencies. Investors always keep in mind that the market is very volatile. You should only use money that you don’t need to live. Sensible risk management is also always important.