Understanding Bitcoin Halving

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Understanding Bitcoin Halving

Understanding Bitcoin HalvingAn upcoming event related to Bitcoin mining could trigger the rally that so many investors have been anxiously awaiting. The event in question is known as “halving,” and it involves a change in the rewards that Bitcoin miners can expect in return for their work in clearing transactions.

Anticipating the Next Bitcoin Halving Event

The next halving of Bitcoin is expected to happen in May 2020, and history shows that rallies tend to begin about a year prior to the event. The last time Bitcoin mining rewards went through a halving was 2016, and it was preceded by 12 months of heavy trading volume, mostly on the buy side. Thus far, two respected analysts have pointed out the correlation between BTC rally action a year before the halving, and they believe that current conditions will certainly help with making history repeat itself.

The bear market conditions that have defined Bitcoin trading since last year are still being felt in January. BTC/USD has found strong support at the $3,500 level and is likely to continue trading above this line. Clearly defined support levels tend to motivate traders who thrive on technical analysis; moreover, they also closely follow historical events because of their tendency to occur again. Naturally, these traders look for lower price points before taking positions in the market, and current conditions favor this strategy.

How Investors Should Prepare

From now until May, Bitcoin investors who feel that the halving could result in a rally will likely be watching the market for signs of an exchange rate approaching $3,500; this would create an opportunity to apply the proverbial “buy low, sell high” technique, but only if other traders share this philosophy.

Unless major changes to the Bitcoin blockchain take place between now and May 2020, miners will see their potential rewards reduced from 12.5 to 6.25 BTC at that time; conversely, the anticipation surrounding this event could result in a buying spree and an increase in mining operations.

It should be noted that the BTC halving event is essentially a fundamental aspect, but its anticipation is, in fact, a technical analysis observation. There will be a “fear of missing out” factor among both investors and miners, and this could translate into another long bear market after the event.

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