What investors should do as Bitcoin halving nears (2024)

In the tapestry of the crypto universe, Bitcoin’s (BTC) fourth halving event (expected around April 18) stands out as a pivotal moment. It augments the functioning of Bitcoin’s economic model wherein a calibrated reduction in mining rewards leads to a supply crunch. This event, occurring approximately every four years, is not only a procedural milestone but also a change that influences BTC’s scarcity, thereby impacting its value and the broader investment landscape.

It is even more pertinent given the approval of Bitcoin spot ETFs in the US earlier this year. Bitcoin is already in a price discovery mode after breaching $72,000 this week. This is the first time that BTC hit an all-time high even before the halving. This bullish market sentiment can even extend into late next year giving a portfolio boost to all crypto investors.

Investors need to make prudent and informed decisions in such a landscape where strategic foresight is advised over a hunt for quick gains.

Let us understand how to navigate the emerging cryptoverse in the wake of current developments.

Navigating the market

Current BTC prices are a characteristic of the bull market – a period marked by rising prices and burgeoning buying activity. We are currently at the start of a new bull cycle, a phase where Bitcoin ascends and outpaces all other assets. After Bitcoin's initial surge, attention pivoted to Ethereum, Solana, and their ecosystem counterparts. Astute investors should watch these trends to ride the successive waves of large-cap tokens before the spotlight shifts to the other, smaller assets.

However, volatility is an inherent feature in crypto markets. A 20-30% drawdown is, in fact, healthy for the market to surge further. In such a scenario, making investments via cost averaging (SIPs) helps in gaining reasonably good entries into the market. This also posits a long-term view of investing – the market can be expected to grow over the next year or so but not every single day or month this year. Investors can also look for options like fixed rewards for their crypto assets which would ensure a steady value growth.

Timing the run

Profit-taking is a key enabler of success in crypto investing. Many investors, happy with their paper profits, forget to realize their gains at regular intervals. Taking principle out after their assets hit a targeted price range can be a healthy way to approach the market.

Historical patterns postulate that the zenith of a bull run happens approximately 500 days following a Bitcoin halving. This timeline offers a strategic vantage point. We suggest that investors should accumulate assets during dips and maximize holdings around the anticipated peak, likely to happen between Q2 and Q3 2025. That would be the ideal time to maximize your profit-taking initiatives.

Identifying narratives

Identify new narratives that can drive the market ahead over the next two years. A discerning investor looks beyond the toppings to identify projects with robust fundamentals and enduring potential. Currently, blockchain infrastructure-based projects (layer 1, layer 2, dePIN, etc) are doing well. Maybe, the focus will shift toward gaming, AI, and NFTs over the next few months.

Identify these narratives and ride the wave. In this context, memecoins are an alluring trend that investors can better avoid. The tales of astronomical gains can be attractive, but we advocate a minimal portfolio allocation towards these high-risk ventures.

Understand regulations & safeguard your assets

Regulatory changes and taxation can have a significant impact on the market and the investor. It is important to understand the norms and rules in India and how your trades, and reporting can adhere to them.

Another aspect, that is often overlooked, is around storage and safety of your crypto assets. Adopt personal hardware or software wallets if you understand the workings of blockchains else park your assets in reputed Indian exchanges. There will be too-good-to-be-true scams and schemes that will flood the market. Be vigilant and protect your assets.

Using India-based FIU registered platforms, such as Giottus, can help ease some of the issues surrounding taxation as well as provide a safety net for your assets.

To sum it up, investors in crypto should dedicate time to gaining deep knowledge of the assets and developing a solid investment strategy. They should also practice risk management and maintain investment discipline to increase profitability. Together, let us ride the wave.