Bitcoin price dropped recently below $8K, giving institutional investors an opportunity to buy the flagship cryptocurrency. If you were amongst those who ‘bought the dip’, is it time to take profits?
May 21 2020 | AtoZ Markets – Bitcoin price crashed a whopping 50% on Thursday March 12 this year. The market freefall (catalyzed further by massive liquidations on BitMEX) pushed prices down from $8000 to sub $4000 levels. For some the move was nothing short of a shock, something that almost might have evinced sheer distrust in BTC as a ‘safe-haven’ asset, especially in these trying times.
For the rest the drop brought back December 2018 vibes when Bitcoin price was trading at around $3120, and presented a wonderful opportunity to buy the flagship crypto cheap.
If you were amongst those who ‘bought the dip’, you are easily up more than 50% on your investment. But should all you clever opportunists continue to expect your ROI to appreciate further? Well till the end of the year? Or, should you find solace in whatever you have made and exit markets in the near term?
The Bitcoin Market Scenario Now
If you have been following Bitcoin markets for a considerable time, you are well aware of the third halving event (since the flagship crypto’s inception) which took place on the 15th of May 2020. BTC block rewards reduced from 12.5 BTC to 6,25 BTC, and the daily Bitcoin supply from 1800 BTC to 900 BTC creating a supply crunch and reducing network inflation to 1.8%.
Bitcoin price made an attempt to clear past the $10,000 mark in an impressive rally on April 30, and since then has been trading sideways with frequent attempts to break past the crucial psychological barrier. Actually right now, it’s doing exactly that.
In a series of data points, on-chain crypto market analytics firm, Glassnode, has remarked on the status of on-chain and investor activity on the Bitcoin blockchain and the overall outlook of the BTC market. Most prominently it was found that:
- At $170 billion, Bitcoin’s market cap size is way too smaller than that of gold, the US Federal Reserve Balance Sheet, and the global currency supply. This spurs the conclusion that there is a lot of space for growth and value appreciation
- Folks are looking to remain invested in Bitcoin for a much longer time frame, as more and more investors are withdrawing their BTC balances from crypto exchanges and holding them in cold wallets. The bullish optimism is high. On-exchange Bitcoin balances have fallen 10% from the highs seen in January
- Long-term investors have increased their positions by buying more BTC after the Black Thursday crash. To put things in perspective, folks long on Bitcoin have been accumulating more than 80,000 BTC a day. Also, the number of whales have increased. Entities holding more than 1000 BTC have hit a 2-year high and the activity is very much in congruence with the previous halvings.
- Bitcoin’s mining hash rate hit a new all-time high. The figure now stands at 150 exahashes per second.
Bitcoin trading volumes have surged
Apart from these metrics, Bitcoin trading volumes have surged humongously post the Black Thursday crash. Agoradesk, Binance, and other crypto exchanges executed $5.6 billion of Bitcoin trades on average since March 16, 2020. According to data from Bitcoinity.
These datasets provide an insightful view into the ongoing state of the Bitcoin ecosystem. But after the BTC halving, a lot depends on how the market reacts to and accepts the changes brought about by the third block reward and daily supply reduction event. Also miner adaptability in tuning the economics of their mining businesses in line with the halving will have a significant role to play.
Bitcoin Price Bearish Case Post Halving
As per a report by Coindesk, historic price patterns suggest that Bitcoin will experience downtrend post the halving. The publication quotes BTC’s market performance just after the 2016 halving in its skeptical stance. Although the benchmark cryptocurrency did indeed rally to it’s historic all-time of $20,000 in December 2017, 1 month after the second block reward reduction event on July 9 when Bitcoin price was trading at $660 spot prices, it crashed to $465 on August 2, a drop of nearly 30%. The same could repeat this year too.
Many holders like you who bought the dip would be eagerly waiting for the halving moment, and consequently would proceed to sell-off their Bitcoin holdings with an intention to take short-term profits. This in turn would put downward pressure on BTC price and we could see it drop below critical support levels. If you are looking for short term profits from your purchase in March, no need to wait post the halving, sell and exit.
Not just short term traders, even miners could sell parts of their BTC stash to make profits. Although this will become a compulsion if the selling move is started by traders as the halving already will have doubled mining costs and with them using outdated hardware further market sell-off could force them out of business if they don’t join the run downwards. In either case, you could just sell your Bitcoins post halving to take short-term profits. Investors off the Indian ocean have been jumping to buy bitcoin in Australia.
Bitcoin Price Bullish Case Post Halving
Golden Crosses are bullish signals which normally occur when a tradable asset’s 50-day moving average crosses above its 200-day moving average. Every time this indicator shows up on charts, it’s safe to assume that a rally is about to begin.
Since Bitcoin is already in a bullish mode, the occurrence of a Golden Cross just after the halving week will double the possibility of an upside price rush. This can be confirmed from similar occurrences from previous market conditions.”
For instance, Bitcoin flashed the Golden Cross on April 23 last year. This was after the cryptocurrency clocked a 32% rally in the month. Subsequently, the run picked pace on the back of a massive buying spree pushing BTC up another 151% to near $14,000.
In case you want to test out the golden cross moment this time, you could drop the short term profit taking idea and actually end up rewarding yourself with much larger gains.
For now, it’s green across the charts, and Bitcoin looks ready to clear $10,000. How will the market behave post the halving? That remains to be seen.
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