As Bitcoin ($BTC) edges closer to its highly anticipated halving event, expected to occur within the next month, the market is showing signs of increased volatility.
Bitcoin has retraced by 13% from it’s all-time high of $73,000, recorded on the 14 March. At the time of writing, $BTC was trading at $63,600, still maintaining 50% of this year’s gains.
Analysts are conflicted on whether $BTC can sustain this year’s momentum leading up to the Bitcoin halving and continue to break price records. There are some who believe Bitcoin is currently in a danger zone.
The ‘Danger Zone’ for Bitcoin
As we approach the Bitcoin halving, the market momentum has led to considerable gains, with Bitcoin’s price rallying by 50% in 2024.
However, analysts have cautioned investors about entering the market right now, referring to the current phase as the “Danger Zone.”
This term has been emphasised by cryptocurrency analyst Rekt Capital, who noted the historical price retracements Bitcoin has faced in the 14 to 28 days leading up to past halvings. In previous cycles, such as in 2016 and 2020, Bitcoin’s value dipped by 40% and 20%, respectively, during these pre-halving periods.
This year, the pattern appears to be following suit, with Bitcoin experiencing a substantial rise followed by a retraction, aligning with Rekt Capital’s forecast of a “pre-halving rally” and subsequent “pre-halving retrace.”
Coinbase’s analysis on Bitcoin’s halving
Coinbase, a leading cryptocurrency exchange, has provided its perspective on the upcoming Bitcoin halving, marking the event’s significance not just for Bitcoin but for the broader cryptocurrency market.
The exchange advised in a new blog post against drawing firm conclusions from historical halving events, highlighting the unique circumstances surrounding this year’s halving.
A major development affecting the current Bitcoin cycle is the recent approval of US spot Bitcoin ETFs, which have altered market dynamics by providing consistent daily inflows. This new factor, according to Coinbase, could reshape the traditional supply-demand balance as the halving reduces the rate of new Bitcoin entering the market.
The exchange cautions that while the environment is changing, it may not immediately lead to a supply-demand crunch.
Coinbase emphasises the launch of Bitcoin ETFs as a milestone in integrating cryptocurrencies into mainstream financial portfolios.
The exchange said in the blog post: “We believe the current price move is only the beginning of a longer bull run and that it will take further price appreciation in order to drive supply vs demand dynamics into balance.”
