How to Trade Cryptos Ahead of the Bitcoin Halving Event?
What is Halving?
The next Bitcoin halving is imminent, but what exactly is it? The Bitcoin blockchain network is decentralized, which means that it does not have a central player, it is held together by the participants themselves.
When a party initiates a transaction, the transaction enters this network of peer-to-peer computers (nodes). The nodes control and validate the transaction, which, in addition to other transactions, forms a new block and enters the existing blockchain. This process by which Nodes allow transactions is called mining because after checking the transaction, the Node receives Bitcoin as a reward.
This reward is called Block Reward, which is halved every 4 years. The current reward value is 12.5, which will drop to 6.25 on May 12th. This date is assumed and it depends on the average number of blocks per day.
The hash rate is the number by which we measure the performance of miners. As this rate increases, more blocks are created per day, further pushing the assumed halving time.
The hash rate fell 3% the previous week, but at the same time, the price of Bitcoin rose 8%. This is contrary to the market conclusion that there is a strong correlation between the two numbers and they follow each other.
If the price of Bitcoin measured in dollars increases, it means more profit for miners as well, because they can sell their rewards at a higher price.
If both the price and the hash rate remain the same, the profitability of the miners will suffer a huge negative change. Following this scenario, miners will be forced to buy, or at least use alternative methods to increase, the number of their mined Bitcoins to remain profitable.
How to trade BTC now?
Weekly supports and resistance of BTC are as follows:
Supports –
$8550-8640 weak
$8190-8280 neutral
$7720-7810 strong
Resistances-
$9000-9045 weak
$9360-9450 neutral
$9700-9810 short term strong
$10000 (Psychological)
You should buy on rumors and sell on the news. This is the secret of the successful trader. Do not allow your sentiments to take over you now to take the extreme risk as it might give you huge losses. There will always be opportunities in the market.
Personally, I see Bitcoin rising up close to the halving date and then a dump of $1000 to $1500. Previous two halving were different as BTC was quite new, was not so much used like today or even the hash rate was not so high. Now everyone knows BTC so it will be very interesting to see what will really happen. We will see higher levels in the long run for sure as BTC will keep appreciating in the long run.
How to trade altcoins?
I would say better to stay away from altcoins when BTC is not stable because most of the coins are paired against BTC which means the altcoins profitability depends on the BTC price movement. If there are any drastic price swings in BTC then you will lose money in terms of Satoshi on your altcoin trades.
I am looking at buying the following coins on Binance exchange against BTC pairing:
1. STORJ/BTC with a Stop Loss of 1110 and a target of 1475 as it is having good support at 1110 and looking good at this price range now.
2. MCO/BTC with a Stop Loss of 4799 and a target of 6500-7100 as some good accumulation has happened for quite a sometime and is also available close to its support level.
3. WABI/BTC with a Stop Loss of 916 and a target of 1080-1145 as it has attempted to break out of the resistance but recent BTC movements have kept it within the range but breakout can happen anytime.
4. SYS/BTC with a Stop Loss of 234 and a target of 295-320 as it is available near the strong support zone now and accumulated for some time.
Guruprasad Venkatesha is Co-Founder & CEO of b-cube.ai, French-Hungarian startup making trading in cryptocurrencies easier & more profitable using AI/ML and complex mathematical models. He started his first asset management company when he was 16 years old and had a successful exit later. Then he went on to work for Morgan Stanley as an Investment analyst then he quit the job to jump into the world of Cryptocurrencies.
You can follow him the following social media channels:
LinkedIn: https://www.linkedin.com/in/guruprasadvenkatesha/
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***The information provided on this website does not constitute investment advice, financial advice, trading advice, or any other sort of advice and you should not treat any of the article’s content as such. Author, website or the company associated with them does not recommend that any cryptocurrency should be bought, sold, or held by you. Do conduct your own due diligence and consult your financial advisor before making any investment decisions.***