Bitcoin Halving: Which Strategies Should Investors Consider Ahead Of Much-Awaited Event

OPINION: While BTC and ETH are critical, diversifying with promising altcoins like Solana, Cardano, Tron, and Polygon can offer additional growth avenues.

As we approach the much-anticipated Bitcoin third halving event in April 2024, a wave of hope, speculation, and uncertainty is palpable among investors globally. Understandably, many are pondering whether this event spells turmoil or opportunity for those dabbling in the crypto market. A short answer to our topic is: this is a great opportunity that should be approached prudently while factoring in risks associated with market dynamics and macroeconomic factors. 

Bitcoin’s Current Trajectory 

Currently, Bitcoin is traversing a critical juncture, consistently breaching its price ceilings with remarkable vigour. As we write this, BTC has crossed $61,000 and is still surging. This bullish momentum was initiated largely by the US SEC's approval of the Bitcoin Spot ETF, a landmark decision that has infused the market with renewed confidence and enthusiasm. As Bitcoin edges closer to its all-time high of $69,000, the anticipation of unprecedented price discovery is felt.

The reverberations of this momentum are not confined to Bitcoin alone. Ethereum (ETH), another stalwart in the crypto space, is carving its unique growth path, buoyed by positive market sentiments and potentially, the green light for an ETH Spot ETF. These developments signal the robust health of the market and foster a conducive environment for investment and growth.

Risks Involved: Miners, Volatility, and Macro

The halving presents its compelling market narrative but is often riddled with uncertainties. 

As speculations and bullish sentiments ride, we may observe that traders, who front-run the narrative, may take quick profits just before the halving impacting Bitcoin’s price in late March or early April this year. We are confident that spot ETFs will draw in additional demand that offsets this anticipated volatility.

Post halving, miners will get lower BTC than usual affecting their business and, in turn, the network’s hash rate. This is a short-term phenomenon and is usually solved within months as Bitcoin’s price catches up with reduced supply. 

Another point of note (unrelated to the halving) is that the major economies may be on the verge of a recession this year. If that happens, crypto being a risk-on asset, will see a quick dip in value in the short term. 

Factoring in the above, let us look at how investors can approach crypto investments this year.

Investment Strategies In The Face Of BTC Halving

Investors may be at a loss in positioning their portfolios effectively. As someone who has observed and worked in this space for long, I advocate an informed investment plan, particularly in leading assets like Bitcoin and Ethereum. 

Strategic allocation: Given the promising outlook for Bitcoin and Ethereum, allocating 60-70% of your crypto portfolio to these assets could be advantageous. Their strong market presence and potential for growth with minimal risk make them pivotal to any crypto portfolio.

Diversification with altcoins: While BTC and ETH are critical, diversifying with promising altcoins like Solana, Cardano, Tron, and Polygon can offer additional growth avenues. These assets, known for their innovation and dynamic ecosystems, could complement your core holdings effectively.

Look for emerging narratives: The burgeoning AI and GameFi sectors present new frontiers for investment. Tokens like Render, Fetch.ai, and Beam, rooted in these domains, are garnering attention for their potential to reshape the crypto ecosystem. With the growth in Ethereum, its layer 2s like Polygon, Arbitrum, and Optimism are also a great narrative play for the upcoming bull market. Staying attuned to such emerging narratives can offer investors early mover advantages in burgeoning markets.

Use instruments like SIPs for the long-term: Volatility is an intrinsic aspect of the crypto market. Adopting a weekly cost-averaging plan (like SIPs) can mitigate risk and average out price fluctuations, offering a more stable investment trajectory. Embrace a 2 to 3-year investment outlook to navigate the inherent volatility of the crypto market. Such a perspective enables you to ride out short-term fluctuations and capitalize on the market’s long-term growth trajectory. 

Vigilance against scams: As the market thrives, it inevitably attracts nefarious elements aiming to exploit investor enthusiasm. It is imperative to exercise caution, eschew offers that seem too good to be true, and engage with reputable Indian exchanges. Due diligence is not just recommended; it is essential for safeguarding your investments.

Even as the halving presents uncertainties, the overarching market indicators and conditions suggest a fertile ground for investment this year. As we navigate this milestone, the blend of strategic investment in stalwarts like Bitcoin and Ethereum, coupled with explorative allocations to layer 2 assets, and emerging tech narratives, can offer a balanced and forward-looking investment stance.

(The author is the CEO of crypto platform Giottus)

Disclaimer: The opinions, beliefs, and views expressed by the various authors and forum participants on this website are personal and do not reflect the opinions, beliefs, and views of ABP Network Pvt. Ltd. Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Cryptocurrency is not a legal tender and is subject to market risks. Readers are advised to seek expert advice and read offer document(s) along with related important literature on the subject carefully before making any kind of investment whatsoever. Cryptocurrency market predictions are speculative and any investment made shall be at the sole cost and risk of the readers.