Bitcoin (BTC-USD) is months away from the next halving which is expected to be around April 17, 2024. The halving events have historically resulted in strong price appreciation for Bitcoin and alt coins. While there is no guarantee that strong price appreciation will occur this time, Bitcoin is set up for a strong move higher over the next year and possibly through most of 2025 on a technical basis.
The last Bitcoin halving event in May 2020 resulted in the crypto coin reaching its all-time high of 68,790 in November 2021. This was a significant gain over the low of $3,850 from March 2020. The low point for Bitcoin was probably driven down further by the COVID-19 black swan event in 2020. The price of Bitcoin at the May 2020 halving was $8,590.
Previous halvings also resulted in significant price appreciation for Bitcoin. The first halving drove the price from $12.40 to $1,170 from December 2012 to July 2016. The second halving drove the price from $535 to $19,400 from August 2016 to December 2017. Of course, these large gains were followed by sharp bear markets after the peaks were reached. I find that using the monthly chart can help investors/traders enter and exit Bitcoin to capture and lock in the significant gains that are driven by the halving events.
Bitcoin’s Monthly Chart
The monthly chart (each candle represents an entire month) above shows how significant the last bull market was from 2020 through November 2021. We can also see how drastic the drop was after the double top from November 2021 to December 2022.
Since such large fluctuations exist in the price of Bitcoin, a viable strategy could be to trade in and out of the crypto coin to maximize earnings over time. Historically, buying before or around the halving events have been good entry points. The exit points for profit-taking can be when the purple RSI line (bottom of the chart) moves past 90 as indicated by the green overbought zone.
The buy zones on the chart can be when the MACD histogram lines (middle of the chart) turn from red to pink and when the RSI moves below the 50 midpoint and begins to turn up. Some investors/traders may be more comfortable buying when the MACD histogram shows its first or second green bar and when the blue MACD line crosses above the red signal line.
If you decide to go with the more aggressive early point when the MACD histogram shifts from red to pink bars, a dollar cost averaging in strategy might be best. This would have traders entering Bitcoin in the 4th quarter of 2022 before the large move higher in 2023.
Then, a scaling out strategy could be used to take profits beginning when the RSI moves into the overbought zone and when the MACD histogram bars turn from dark green to light green. Then, completely exit the position when the blue MACD line crosses below the red signal line (when the red bars in the histogram begin to appear).
The rise in the price of Bitcoin in 2023 was likely the result of optimism regarding the anticipated approval of Bitcoin ETFs. This price action could actually be a buy the rumor, sell the news type of event. The Bitcoin price did increase from below $16,000 and rose to a recent price above $38,000. So, if the actual news of a Bitcoin ETF approval does take place, it could result in a sell-the-news reaction. That will lead me to the weekly price chart.
Bitcoin’s Weekly Chart
I zoomed in a bit on Bitcoin’s weekly chart where each candle represents an entire week. We can see that the purple RSI line recently crossed into overbought territory. It appears that it might be dropping from this level as the price fell from above $38,000 to below $37,000.
It is possible that the price will continue to rally in the overbought area on the weekly chart until the news of a Bitcoin approval occurs. With the price already overbought, the reaction from traders could be to lock in profits from the 2023 gains, leading to a near-term sell-the-news reaction. Profit-taking could occur any time now that the price is in overbought territory.
Bitcoin’s Daily Chart
I included Bitcoin’s daily chart above to get a shorter-term perspective. The daily chart shows how the stock recently dropped from an overbought condition according to the RSI indicator. The daily chart is in a downtrend as the blue MACD line crosses below the red signal line. Investors should wait to see if the price can hold above the 50 level on the RSI. That would be bullish. However, a drop below the 50 level would be bearish and could drive the price to an oversold level which occurred in August. So, will wait to see how the near-term price action goes before deciding to jump back in.
The Bottom Line on Bitcoin
The halving event which is estimated to be in April 2024 is expected to result in a new high price for Bitcoin which could occur within about 18 months of the halving based on past performance. If the future price action follows the past price action after halvings, then I would guess that Bitcoin would rally to a deep overbought level on the RSI on the monthly chart. This could take the price to new highs. Of course, there is no guarantee that this will occur.
Price predictions for the post-2024 halving vary greatly. Some experts think the halving is already priced in, while others are projecting Bitcoin to reach anywhere from $60,000 to $250,000 within about 18 months of the halving. That would take us to about October 2025. These price predictions vary based on the analysts doing the estimating.
Based on the long-term technical analysis and past behavior, I would estimate that the price does go higher than the previous high. This would be in line with previous sentiment and price action. The last bull market took the price about 18x higher than the COVID low in March 2020. COVID probably drove the price down to an exaggerated level. So, I would estimate a 10x move for Bitcoin over the 52-week low of $15,480. This would take the price to $154,800 by October 2025.
The risk is that Bitcoin’s past sentiment-driven demand may not repeat in the future. Bitcoin depends on demand-driven sentiment to move the price higher. So, if for some reason investor sentiment changes to negative in the long term, Bitcoin could lose all of its value. Therefore, Bitcoin should be considered a speculative investment. In that case, investors/traders should only put an amount of money into Bitcoin that they can afford to lose.
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