Learn trading techniques to maximize your investment returns in the cryptocurrency market and take advantage of Bitcoin halving events.

The following halving of Bitcoin is scheduled for April. Historical trends indicate that significant price swings occur before and after a halving event for Bitcoin (BTC), which is now trading at $69,469 as of this writing. Even yet, there are still chances for investing, and traders can make more informed selections about their Bitcoin halving event investments by performing a technical analysis.

This article highlights a few innovative investing options that traders have used on previous Bitcoin halving occasions. But keep in mind that there is danger associated with all investments, so before attempting these Bitcoin investment ideas, educate yourself thoroughly about investing.

Strategies to capitalize on the Bitcoin halving

The methods to profit from the Bitcoin halving event are covered in detail in the sections that follow.

Timing the market

The idea of “buying the rumor, selling the news” is the foundation of the strategy. To comprehend market dynamics, investors track market news and sentiment. They then perform market analysis and act on trade signals they identify. But because it’s rare for an investor to time the Bitcoin halving perfectly, this is one of the most complex strategies to profit from it.

Events involving the halves of Bitcoin have historically had a beneficial effect on its price and sparked investing trends. Events involving halving frequently generate positive market mood and contribute to bullish runs both before and after. The demand for Bitcoin increases due to the anticipated shortage, which raises its value. But there’s no assurance that the 2024 halving would result in a price increase comparable to past halvings. To have a deeper understanding of price trends, always conduct your study.

Planning for both short- and long-term investments

A trader must sketch out their investment goals and evaluate their level of risk tolerance before they can design their trading strategies. Whether a trader is utilizing Bitcoin as a store of value or is taking advantage of the regular price changes to make profitable decisions will determine this. An investor can create a short- or long-term strategy once they are aware of their risk tolerance and investing horizon:

Short-term trading

Traders who use this approach typically do so to profit in the near term by taking advantage of regular market swings. To succeed, thorough technical analysis and the implementation of reliable trading systems are needed. In addition, they track changes in price, spot trends, and determine when to enter and quit a trade.

Long-term strategy

Another name for this is a buy-and-hold (hold) approach. Although there is no assurance that the price will rise following the 2024 halving event, historical data indicates that Bitcoin’s price increases several months or years later and reaches all-time highs each time.

Dollar-for-cost average

Using the dollar-cost averaging (DCA) approach, money is invested at regular, preset intervals, independent of the price of Bitcoin at those times. By spreading out the investment over time, the technique seeks to lessen the effects of market volatility.

When there is tremendous volatility during Bitcoin’s halving—which has traditionally resulted in significant price movements—DCA has shown to be a successful approach for other investors. It relieves the strain of attempting to time the market just so.

Additionally, by gradually acquiring Bitcoin, the DCA technique lessens the impact of transient price swings. This guarantees that investors will average out their cost base and perhaps realize long-term price gains.

Increasing Portfolio Diversification

As the adage “Don’t put your eggs in one basket” suggests, diversifying portfolios is one of the most essential investing methods. This lessens the impact of an underperforming investment by allowing investors to spread their risk across a variety of assets.

A trader might take advantage of other cryptocurrency opportunities in a well-balanced portfolio, even though Bitcoin might be the primary financial asset. A Bitcoin holder may decide to sell part of their BTC to increase the size of their investment portfolio, or they may choose to invest in other cryptocurrencies or conventional asset classes if the price of Bitcoin rises.

Investors should, as usual, perform a fundamental study of all possible investment assets before making any decisions.

Trading Bitcoin Derivatives

A derivative is an agreement between a trader and a third party in which the value of the derivative is determined by the underlying asset, in this case, Bitcoin. Leveraging the increased volatility and market speculation that frequently follow these periods is essential when focusing on Bitcoin futures trading in the context of halving events.

When traders speculate about how the price of Bitcoin will change in the future in the hopes of making money if they guess correctly, they use derivatives to determine the parameters of their wagers. To protect themselves from long positions—that is, bets that the value of Bitcoin would rise—they might also trade derivatives. If Bitcoin’s price doesn’t increase within the allotted time, trading derivatives could help offset some of your losses.

Trailers use derivatives in the following ways when there is a Bitcoin halving event:

Choices

The conditions of the options contract outline the trader’s right to purchase Bitcoin at the striking price or a predetermined quantity within a predetermined time frame. The contract does not require the trader to purchase the underlying asset.

Given the significant volatility typically seen during halving occurrences, traders may utilize options to purchase or sell Bitcoin at the best moment. For example, if a trader thinks that the halving will raise the price of Bitcoin since there will be less BTC available, they can purchase call options before the halving event. On the other hand, if a trader expects a price fall as a result of potential short-term sell-offs or market changes, they might buy put options.

Prospects

Futures contracts allow traders to purchase or sell Bitcoin on a predetermined date at a predetermined price. Unlike with options contracts, they are not obligated to purchase or sell the contract at a later time. Futures contracts also allow traders to speculate on or protect themselves from price changes following a halving.

For example, traders can decide to sign into futures contracts to lock in a price for buying or selling Bitcoin at a later date, maybe around the halving event. If a trader thinks the price will go up after the halving, they can enter a long futures contract. However, if they believe that prices will drop, then it may be beneficial to enter into a short futures contract.

Indefinite agreements

These are the cryptocurrency versions of the conventional financing contract for differences, also referred to as everlasting swaps or futures contracts. Contrary to futures and options contracts, perpetual contracts are characterized by an indefinite duration. As long as the trader has the funds to cover the funding rate and holding costs, they may retain the position.

The perpetual contract price and the index price typically diverge because of the frequent fluctuations in the cost of Bitcoin during halvings. Those with a long position often pay the funding rate to make up the difference in price if the perpetual contract is more expensive than the index. Similarly, traders who “go short” usually pay the funding rate to make up the difference if the price of the perpetual contract is lower than the index.

Because perpetual contracts never expire and allow traders to retain long or short positions indefinitely, they are appealing during halving occurrences. Traders may go long if they anticipate a long-term price increase from the halving; they may go short if they anticipate a decline in price or increased volatility.

Techniques for risk management to handle the volatility of bitcoin

Traders should only invest money they can afford to lose, according to the golden rule of investing. This is especially true in light of the volatility of Bitcoin. An ideal halving strategy would involve placing a stop order because it is impossible to predict which way the price of Bitcoin would swing, even with the historical price gain following the halves. When prices decline more than the investor anticipated, the order will sell the asset to prevent further losses.

The take-profit order is on the other end of the stop-loss order. Bitcoin price volatility means it can surge when a trader is not actively trading and then falls as soon as they start. To capitalize on potential profits, traders can set up a take-profit order, which automatically triggers the sale of assets once the price reaches a predetermined, desirable level.

The ultimate objective of the strategies above is to protect investments against disastrous losses while securing profits in a volatile market. Nevertheless, investors should evaluate their risk tolerance and match their investments to their financial objectives regardless of what happens.