Bitcoin’s mania and 2024 halving event have heightened market expectations and investor strategies.
When Bitcoin surpassed the $69,000 mark and hit a new all-time high, it led to a phase in the so-called “euphoria zone” market cycle, characterized by extreme optimism and speculative frenzy among investors.
With the upcoming halving event in April, all the hype surrounding it has only fueled this enthusiasm further. This sentiment has led to an increase in the price of BTC as more investors flock to the market, perpetuating a self-reinforcing cycle of optimism and price increases.
But what can we expect to happen when events hit the market? Halving events have historically heavily impacted investor behavior patterns, and we are already ahead of the curve this year. So, how should investors change their strategies amid the current craze? Let's take a closer look.
Halvings in 2020 vs. 2024: How has the backdrop changed for Bitcoin?
This halving will be the fourth in BTC’s history. Since the last event in 2020, Bitcoin has made tremendous progress towards mainstream adoption, underlined by significant improvements in the regulatory framework and technical infrastructure.
Among recent events, the introduction of Bitcoin ETFs has also significantly contributed to the new highs in positive investor sentiment. Their approval by the US SEC marks an important milestone for Bitcoin as a legitimate investment asset. In addition, ETFs have broadened access to BTC for new groups of investors, including financial advisors and capital market allocators. This wider access has attracted a large amount of capital inflows.
As Bitcoin continues to gain traction among institutional investors and retail traders, expectations for the 2024 halving event have increased, and expectations are high for its potential impact on market dynamics.
How do all-time highs affect investor stance?
Historically, Bitcoin has experienced significant price fluctuations after halving events due to the reduction in block rewards. As demand increases and supply is limited, Bitcoin's appeal grows, driving further investment interest.
However, the situation before the 2024 halving is already different, with Bitcoin reaching an all-time high of $73,000 before the halving event. This deviation from past patterns suggests that market sentiment is getting ahead of historical patterns and the dynamics after the April halving may be very different from previous cases.
In the context of this year’s Bitcoin halving, the old trading adage “buy on rumor, sell on news” may prove appropriate. This means that when investors hear a rumor or expectation that may affect market trends, they will buy assets in advance in the hope that the asset price will rise and make a profit when the rumor comes true; and when the rumor or expectation is actually confirmed or When the announcement is made, investors will choose to sell assets, because the market may have reacted to the news at this time, and the price may have risen to a short-term high. In this way, investors lock in profits. This behavior reflects a common psychology and strategy in the market, which is to take advantage of market expectations and information asymmetry to obtain profits.
Driven by anticipation of the event, investors are actively accumulating Bitcoin to “buy on rumour.” However, once the event has passed, they may engage in profit taking rather than push the price further and "sell on the news" in the process.
Considering market dynamics are moving faster this year than in previous cycles, BTC price may not have any more room to grow around the news once the halving event passes. If investors choose to go down the path of profit-taking, this will reflect the market's ability to price in future events and adjust accordingly, leading to a period of price adjustment and recalibration.
Stay cautious in the "euphoria zone"
Investors need to exercise caution and maintain a balanced approach to investing in Bitcoin, especially during exuberant times like the ones we are seeing now. While it's natural to get excited about the potential for significant returns, the euphoric zone is also characterized by heightened volatility. Many investors may ignore the fundamental factors driving Bitcoin's value and focus only on short-term price increases, which can lead to unsustainable market dynamics.
At the same time, price corrections are a natural and necessary part of any asset's upward trajectory for a number of reasons. Rapid and sustained price growth can lead to overvaluation, where the price of an asset exceeds its intrinsic value. This can create a speculative bubble, driven more by investor enthusiasm than anything else. Price corrections help defuse such bubbles, aligning asset prices with their true value and restoring market balance.
As for when this adjustment will occur, it is difficult to have any definite measures. Traders should remember that markets generally do not have fixed peaks or troughs. Just because an asset price has reached a high, it doesn't necessarily mean it has to go down again. vice versa. This emphasizes the unpredictability of the market and the need for caution in trading decisions.
As investors navigate the opportunities and uncertainties presented by the 2024 halving, a proper understanding of market dynamics and risk management strategies are critical to maximizing potential returns. If you plan to invest in BTC, make sure you do so for the right reasons and make your decision after due consideration of its long-term viability and the risk factors involved. #投资情绪 #比特币减半
