Bitcoin Halving — Time to Buy or Sell?
Bitcoin Halving Set to Take Place on April 19, 2024
It’s always a bit of a red flag when everyone starts talking about the Bitcoin price. It’s usually a sign for me to be selling, not buying. They have almost surely missed the boat and buying their Bitcoin and cryptocurrencies at the peak of the bull market before the next crash. I then spend the next 6–12 months hearing that Bitcoin is rubbish and how they have lost 50% of their investment. The next time there is any piep from them is when there is the next bull market and they are able to sell their investment and not make a loss.
The question now is should they be selling? Should we be buying? Should they be holding? If you look at the graphs, the bull market is still looking strong on the daily.
This graph is showing the SMA50 and SMA200 daily crossovers for BTC-USD. You will see at the end of October 2023, the SMA50 crossed above the SMA200 on the daily which was followed by a large price increase.
I created this graph by using data from EODHD APIs, using their Python library “eodhd”.
import pandas as pd
import matplotlib.pyplot as plt
from eodhd import APIClient
api = APIClient(<YOUR_API_KEY)
def get_ohlc_data():
df = api.get_historical_data("BTC-USD.CC", "d", results=365)
return df
def add_ta(df: pd.DataFrame = None) -> pd.DataFrame:
df["sma50"] = df.close.rolling(50, min_periods=1).mean()
df["sma200"] = df.close.rolling(200, min_periods=1).mean()
return df
if __name__ == "__main__":
df = get_ohlc_data()
df = add_ta(df)
df[["close", "sma50", "sma200"]].plot(
title="BTC-USD.CC (1D) from EODHD APIs",
kind="line",
color=["black", "green", "blue"],
figsize=(36, 12),
)
plt.xlabel("Date")
plt.ylabel("Price")
plt.tight_layout()
plt.savefig("btc_usd_cc_1d.png")
plt.show()It does however seem like it’s slowing down before the halving. This hourly graph below is showing the SMA50 has crossed below the SMA200.
import pandas as pd
import matplotlib.pyplot as plt
from eodhd import APIClient
api = APIClient(<YOUR_API_KEY)
def get_ohlc_data():
df = api.get_historical_data("BTC-USD.CC", "1h", results=365)
df = df[df['close'].notna()]
df = df[df['close'] != 0]
df = df[df['close'].notna() & (df['close'] != 0)]
return df
def add_ta(df: pd.DataFrame = None) -> pd.DataFrame:
df["sma50"] = df.close.rolling(50, min_periods=1).mean()
df["sma200"] = df.close.rolling(200, min_periods=1).mean()
return df
if __name__ == "__main__":
df = get_ohlc_data()
df = add_ta(df)
print(df)
df[["close", "sma50", "sma200"]].plot(
title="BTC-USD.CC (1H) from EODHD APIs",
kind="line",
color=["black", "green", "blue"],
figsize=(36, 12),
)
plt.xlabel("Date")
plt.ylabel("Price")
plt.tight_layout()
plt.savefig("btc_usd_cc_1h.png")
plt.show()The 6-hourly graphs aren’t looking too bad either, but it does look like it’s slowing down. EODHD APIs doesn’t provide this resolution as standard, but it’s straightforward to resample hourly data into 6 hour bins using Pandas.
import pandas as pd
import matplotlib.pyplot as plt
from eodhd import APIClient
api = APIClient(<YOUR_API_KEY)
def get_ohlc_data():
df = api.get_historical_data("BTC-USD.CC", "1h", results=2160)
df = df[df["close"].notna()]
df = df[df["close"] != 0]
df = df[df["close"].notna() & (df["close"] != 0)]
df_resampled = df.resample("6H").agg({"close": ["first", "max", "min", "last"]})
df_resampled.columns = df_resampled.columns.droplevel(
0
)
df_resampled.rename(
columns={"first": "open", "max": "high", "min": "low", "last": "close"},
inplace=True,
)
return df_resampled
def add_ta(df: pd.DataFrame = None) -> pd.DataFrame:
df["sma50"] = df.close.rolling(50, min_periods=1).mean()
df["sma200"] = df.close.rolling(200, min_periods=1).mean()
return df
if __name__ == "__main__":
df = get_ohlc_data()
df = add_ta(df)
print(df)
df[["close", "sma50", "sma200"]].plot(
title="BTC-USD.CC (6H) re-sampled from EODHD APIs",
kind="line",
color=["black", "green", "blue"],
figsize=(36, 12),
)
plt.xlabel("Date")
plt.ylabel("Price")
plt.tight_layout()
plt.savefig("btc_usd_cc_6h.png")
plt.show()The forth Bitcoin halving is set to take place on the 19th of April 2024, with the block reward expected to decrease from 6.25 to 3.125 Bitcoin.
Historically, the Bitcoin halving events have had a notable impact on the cryptocurrency price, though the effects haven’t always been immediate. The halving event occurs approximately every four years (every 210,000 blocks, to be precise) and reduces the reward that miners receive for adding new transactions to the blockchain by half. This process is built into the fabric of Bitcoin to create scarcity, with the intention of controlling inflation and increasing value over time.
What has happened in the past?
- The first halving in November 2012 reduced the reward from 50 to 25 Bitcoin per block. Following this event, there was a gradual but significant increase in the price of Bitcoin. It wasn’t an immediate spike, but the months following the halving saw a notable upward trend, culminating in a dramatic price increase at the end of 2013.
- The second halving happened in July 2016 when the reward dropped from 25 to 12.5 Bitcoin. Similar to the first halving, the immediate impact on the price was not drastic. However, the year following the halving witnessed a substantial price surge, leading up to the record-breaking rally at the end of 2017.
- The third halving happened in May 2020 and the reward decreased from 12.5 to 6.25 Bitcoin. The pattern observed in the aftermath of this halving was akin to previous events, with no immediate significant change in price. However, the following months saw a remarkable increase in Bitcoin’s price, contributing to the bull run of 2020 and 2021.
From these events, a pattern emerges: while the halving does not always lead to an immediate price increase, historically, it has been followed by periods of bullish trends in the months or years that follow. This pattern is often attributed to the reduced supply of new Bitcoin, increasing demand, and speculative interest surrounding the halving events.
It’s important to note, however, that while historical trends can provide insight, the cryptocurrency market is influenced by a wide range of factors including regulatory news, market sentiment, and broader economic conditions. Therefore, while the halving is a significant event, it’s one of many factors that can influence Bitcoin’s price.
It’s also worth mentioning that historically that the run up to the halving and also seen an increase in price, and that’s what we are seeing now. This trend can be attributed to several factors, including speculation, increased media attention, and the anticipated impact of reduced supply on the price. Investors and traders often anticipate the reduced new supply of Bitcoin post-halving, leading to increased buying activity in the months leading up to the event.
Past experience
From my experience a positive change in Bitcoin affects all cryptocurrencies and alt coins. What I have found has worked well for me in the past is to invest into other crypto markets where the price is a lot lower.
Cardano (ADA) for example is only $0.58 and it reached $3.10 on the 2nd of September 2021 during the bull market. Solana (SOL) is $185.74 and reached $259.96 on the 6th of November 2021, and there are many other noteworthy ones like LINK, DOT, MATIC, XRP, ETH, etc.
Just as an example if you purchase Cardano (ADA) today at $0.58 and its price rises to $3.10, your return on investment would be approximately 434.48%.
price_bought = 0.58
price_future = 3.10
investment_return = (price_future - price_bought) / price_bought
investment_return_percentage = investment_return * 100
print(investment_return_percentage)This is just an example based on historical data. I’m not advising you to buy Cardano. There are many crypto markets with significant market cap that have reached highs during the previous halving bull markets.
The point is your return will be decent but modest in terms of Bitcoin if you buy Bitcoin or even Ethereum. The price of those is already quite high so the percentage change vs. the risk is quite low. If you pick another decent altcoin your returns can be much higher.
In summary
Trading and in particular trading cryptocurrencies is risky. Do your research and don’t invest more than you are willing to lose. The upside can be huge but it doesn’t come without risk.
I hope you found this article interesting and useful. If you would like to be kept informed, please don’t forget to follow me and sign up to my email notifications.
If you liked this article, I recommend checking out EODHD APIs on Medium. They have some interesting articles.
Michael Whittle
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