What is the likelihood of a sell-off after halving? How high is this risk for investors? How does bitcoin behave: is it laying the groundwork for a sell-off or is it systematically moving towards new highs?
There is a chance that bitcoin could experience a sell-off after the halving event, but it is hard to accurately estimate since the price is impacted by multiple factors, both market-based and fundamental. A bitcoin halving event occurs when the reward for mining rewards is cut in half, approximately every four years. This process typically results in a decrease in the number of new bitcoins entering circulation and, in the context of supply and demand, can affect the price of the asset. Halving is a relatively new event, and its impact on prices has not yet been sufficiently studied. It is still difficult to quantify the impact of such events due to the limited amount of data and the insufficient number of analytical events.
Probability of post-halving sell-off
After the bitcoin halving, various scenarios could play out, and a sell-off should not be ruled out. Some miners may face increased mining costs due to reduced rewards, thus prompting many to sell some of their mined coins to cover costs. This could temporarily boost supply and put pressure on prices. Some investors may want to offload their bitcoins before or right after the halving to lock in profits or avert potential losses. This event usually occurs without sudden fluctuations.
Risk for investors
Post-halving selling could lead to temporary fluctuations in the bitcoin price and increase market volatility. This could pose a high risk for investors, especially those who are not prepared for such fluctuations and do not have a risk management strategy.
Bitcoin’s post-halving trends
Analysis of previous halving events shows that in the aftermath, bitcoin’s price often increases in the long term. Key factors setting the stage for upside include heightened demand from institutional investors, increased use of bitcoin as an inflation hedge, and an overall upturn in crypto interest.
Despite the possibility of temporary corrections and fluctuations after the halving, BTC could remain a promising asset for long-term investors, especially given the limited supply of coins and all the technological innovation behind the blockchain.