Investing in cryptocurrencies before significant events like Bitcoin halvings can be a strategic move for investors seeking exposure to the cryptocurrency market. Whether to invest in Bitcoin or altcoins depends on individual risk tolerance, investment goals, and market analysis. This article aims to provide insights into whether to invest in Bitcoin or altcoins before the halving this year.
What are Altcoins?
Cryptocurrencies other than Bitcoin, known as altcoins, have expanded beyond their definition to include a range of coins and tokens with various use cases. The top altcoins by market capitalization include Ethereum, BNB, and Solana. Newer players like Green Bitcoin, Sponge V2, and Dogecoin20 are also gaining momentum and are expected to get listed in 2024 on Binance and other major exchanges, with Michael Graw expecting some of these to take off thanks to promising levels of backing in their presales.
Altcoins use consensus mechanisms such as proof of work (PoW) or proof of stake (PoS) to offer features beyond Bitcoin and Ethereum. They serve functions like payment tokens, stablecoins, or security tokens within the cryptocurrency ecosystem.
What is the Bitcoin Halving Event?
The Bitcoin halving event happens every four years when miners' rewards for validating transactions on the blockchain are halved. This reduction in rewards reduces the rate at which new bitcoins are generated, limiting the supply of bitcoins to 21 million.
The halving process plays a role in maintaining Bitcoin's scarcity and value. It ensures a controlled and predictable release of Bitcoins following a programmed schedule within the Bitcoin protocol until the final Bitcoin is mined. Historically, Bitcoin halving events have impacted Bitcoin's price. The reduction in the rate of bitcoin production results in scarcity and sustained demand, often leading to pressure on prices.
Additionally, these events indicate to the market that the supply of bitcoins is decreasing, which boosts investor confidence and speculation while influencing price trends. Bitcoin halving events represent milestones in Bitcoin development, shaping its landscape and reinforcing its position as a decentralized digital asset with lasting value.
Our Brokers Recommendations for Bitcoin Trading
Impact of the Bitcoin Halving Event on Altcoin Investments
Historically, Bitcoin halving events have led to significant price surges, driven by reduced supply and increased demand. The decrease in the rate of new bitcoin creation leads to scarcity and continued demand, often resulting in upward pressure on the price. Additionally, halving events signal to the market that the supply of new bitcoins is diminishing, boosting investor confidence and speculation and further influencing price dynamics.
The Bitcoin halving event impacts investments in Bitcoin and altcoins in various ways, including capital shifts. As investors seek higher returns and diversification, capital may shift from Bitcoin to altcoins post-halving. Additionally, increased interest in altcoins following a Bitcoin halving can result in higher valuations for certain altcoins. Investors may look for opportunities in strong altcoins with promising fundamentals to maximize returns amidst market shifts.
Consider diversifying your investment portfolio by considering a mix of Bitcoin and altcoins. Diversification can help spread risk and capture opportunities across different cryptocurrencies. Stay informed about the regulatory environment surrounding crypto. Regulatory changes can impact the value and adoption of Bitcoin and altcoins.
4 Factors to Consider Before Investing
Before investing in Bitcoin and altcoins and halving, several key factors must be considered to make informed investment decisions. These factors help investors navigate the cryptocurrency market effectively and maximize their investment potential. Here are the factors to consider:
Analyze the Historical Performances
Monitor market sentiment and expert opinions regarding the impact of the halving on Bitcoin and altcoins. Positive sentiment and bullish forecasts can influence investment decisions. Analyze Bitcoin and altcoins' historical performance before and after previous halving events. Understanding past price movements can provide insights into potential future trends.
For example, analyzing the historical performances after previous halving events can be seen with Litecoin (LTC). Leading up to Litecoin's halving in August 2019, the price surged significantly, more than tripling in value.
However, Litecoin experienced a consolidation period after the halving and a gradual price decline over the following months, declining by 74% by the end of that year. This example illustrates how altcoins like Litecoin can exhibit strong price momentum before halving events, followed by price corrections and consolidation post-halving.
Our Brokers Recommendations for Bitcoin Trading
Consider the Utility and Use Cases
Evaluate the utility and use cases of the altcoins you are considering. Altcoins with strong utility, innovative features, and real-world applications may have higher growth potential. Solana is recognized for its real-world applications as the native cryptocurrency used for transactions on the Solana blockchain.
It boasts of being one of the fastest blockchains globally, supporting over 400 projects in decentralized finance (DeFi), non-fungible tokens (NFTs), gaming, and Web3. Solana's ecosystem is known for its scalability, low fees, and support for various programs like decentralized exchanges, stablecoins, and digital wallets, making it a prominent altcoin with robust utility and practical applications.
Review the Market Cap and Liquidity
Consider the market capitalization and liquidity of the altcoins. Higher market cap and liquidity indicate stability and easier trading. An example of market capitalization and liquidity of altcoins in 2024 can be illustrated by the performance of SingularityNET (AGIX) and Fetch.ai (FET), as highlighted in the provided sources. SingularityNET's market price surged by 39% on February 22, showcasing strong gains and market interest.
On the other hand, Fetch.ai experienced a 23% price increase, achieving a new all-time high (ATH). These examples demonstrate how specific altcoins like AGIX and FET exhibit notable market capitalization growth and liquidity in 2024, reflecting investor confidence and trading activity in these digital assets.
Understand the Technology and Development
Assess the technology behind the altcoins and the development team. Strong technological fundamentals and active development can contribute to long-term success. When considering an investment in Bitcoin or an altcoin like Green Bitcoin, for instance, compare the technology behind both and the development teams to make an informed decision.
Bitcoin is the pioneer cryptocurrency known for its secure and decentralized blockchain technology. It operates on a Proof-of-Work (PoW) consensus mechanism, ensuring network security through mining. Bitcoin's development is decentralized, with contributions from a global community of developers. The core development team focuses on maintaining the network's stability and security.
On the other hand, Green Bitcoin operates on the Ethereum network, utilizing a more energy-efficient Proof-of-Stake (PoS) consensus mechanism than Bitcoin's PoW. It emphasizes sustainability and eco-friendly practices. Green Bitcoin's development team is responsible for implementing the unique staking features and the "Predict to Earn" model. The team's focus is on creating a sustainable and innovative cryptocurrency ecosystem.
Bitcoin offers stability, recognition, and broader adoption due to being the first cryptocurrency. Its technology is well-established, with a focus on security and decentralization. Green Bitcoin provides opportunities for innovation with a sustainable approach and unique staking features. Understanding the technology behind each and the development teams' focus can help you decide whether to invest in Bitcoin, altcoins, or both based on your investment goals and preferences.
Our Brokers Recommendations for Bitcoin Trading
The Bottom Line
Before investing in Bitcoin or altcoins and before halving, consider the various factors that come into play. Investing in altcoins or BTC before the halving can be a strategic move, as Bitcoin and various altcoins show promising potential for significant returns. Overall, the Bitcoin halving event can catalyze market sentiment, drive up prices, and create opportunities for both Bitcoin and altcoin investors. It is essential for investors to consider the broader market dynamics, technological advancements, regulatory updates, and economic conditions alongside the halving event's impact on investments in Bitcoin and altcoins.