Cryptocurrency traders are keeping a close eye on the Bitcoin market as a potential “bargain-buying” window opens up ahead of the upcoming Bitcoin halving, scheduled for April. Prominent pseudonymous crypto trader Rekt Capital has outlined a five-stage market pattern, signaling that investors may have just two weeks to make the most of favorable prices before a pre-halving rally begins.
Bitcoin halving: A catalyst for bullish sentiment
The Bitcoin halving occurs approximately every four years and involves cutting mining rewards in half for miners. This event has historically been regarded as a bullish catalyst for Bitcoin’s price.
Rekt Capital highlights that the previous Bitcoin halvings have been characterized by steep price dips in the months leading up to the event, ultimately generating substantial returns for investors. The upcoming halving in 2024 appears to be following this historical pattern.
Rekt Capital points out that Bitcoin has already undergone an approximately 18% retracement in January, suggesting that there is currently a two-week window during which Bitcoin may undergo another significant pullback. According to the trader, this period could represent one of the final opportunities for investors to buy Bitcoin at attractive prices before the pre-halving rally begins.
Pre-halving rally phase
Following this potential short-term pullback, Bitcoin typically enters what Rekt Capital terms the “pre-halving rally” phase approximately 60 days before the halving event. During this phase, short-term traders aim to capitalize on the growing anticipation and “buy the hype” leading up to the halving. However, as the halving date approaches, a “sell the news” sentiment tends to set in, often occurring one to three weeks before the halving.
In the previous two Bitcoin halvings, Rekt Capital notes that a significant price dip occurred during the weeks preceding the halving. 2016, there was a 38% price dip, while in 2020, a 20% drawdown was observed. This pre-halving retrace is common as traders take profits, resulting in a temporary price decline.
Post-halving : Sideways price action
Once the halving event has successfully transpired, Bitcoin enters a relatively “boring” phase characterized by sideways price action. This period can last an average of 150 days, often disappointing investors who expected immediate price surges following the halving. Many investors get “shaken out” during this time due to the lack of significant price movements.
Finally, Rekt Capital highlights the “parabolic uptrend” phase that follows months of accumulation and sideways trading. Bitcoin experiences accelerated growth during this phase and often reaches new all-time highs.
While Rekt Capital emphasizes the importance of the halving in shaping Bitcoin’s price action, not all experts agree. Some argue that the impact of halving on price is diminishing, with other factors taking precedence.
Ralph Zagury, Chief Investment Officer of Swan Bitcoin, suggests that liquidity is more integral in influencing Bitcoin’s price in 2024. He contends that flows and market dynamics are the primary drivers of price, rendering the halving less impactful than previously thought.
