Navigating the Crypto Sector Ahead of the 2024 Bitcoin Halving Event

Cryptocurrency 6 replies 0 votes 2047 views Tags:  Bear MarketBitcoinBitcoin HalvingBull MarketCrypto
anuv javier 11 months

The world of cryptocurrencies is buzzing with excitement as the highly anticipated 2024 Bitcoin halving event draws nearer. Bitcoin price typically follows a distinct 3-stage, 4-year cycle. This cycle commences with the halving event, sparking a 1-year bull market where Bitcoin soars past previous all-time highs to reach new records. This is then followed by a 1-year bear market, and eventually, a 2-year gradual recovery period back to the all-time high.

Within each bear market, there are five significant sequences of events that have historically occurred: a reversal pattern, a 50% decline from the peak, a rebound to 20% from the peak, another decline to 70% from the peak, and finally, the bottoming out at 85% from the peak.

Bitcoin price has already completed 4.5 out of the predicted 5 bear market sequences. Most importantly, it appears that Bitcoin is now in the recovery phase, suggesting that the next Bitcoin bull market could reach the predicted price target of $100,000 before April 2025.

The bullish outlook isn't limited to Bitcoin alone; it extends to altcoins as well. However, while Bitcoin investors may have reason to celebrate, the same enthusiasm might not translate to the broader crypto sector, especially when it comes to Bitcoin mining companies.

As the 2024 halving event approaches, it's crucial to evaluate the implications for Bitcoin mining companies. The halving will cut the mining reward in half, potentially causing profitability concerns for these companies. Even if the Bitcoin price doubles, the profitability of mining companies might not improve if operating costs rise significantly due to increased mining capacity.

In the current scenario, several Bitcoin mining companies are already operating at a loss, making it difficult for them to survive if the mining reward is halved now. Many of these companies have been funding their operations through debt and equity offerings, leading to significant shareholder dilution.

In light of these challenges, investing in Bitcoin mining companies could be seen as a risky bet, given the uncertainty surrounding their future profitability.

Scenario A: Investing in Bitcoin

Bitcoin's decreased supply and potential ETF approval are positive drivers for the Bitcoin price.
Based on the thesis, Bitcoin is expected to reach $100,000, potentially yielding a 230% return at the current price.

Scenario B: Investing in Bitcoin Mining Companies

Outcome 1: If Bitcoin reaches $100,000
Mining companies may outperform Bitcoin due to their sensitivity to Bitcoin price, but their revenues would only increase by 60%, making them potentially overvalued.
Outcome 2: If Bitcoin doubles its price
Mining companies' revenue and profitability would remain unchanged, offering no positive upside.
Outcome 3: If the Bitcoin price remains unchanged
Most listed mining companies will not be profitable, and some might even become insolvent.

However, all hope is not lost for investing in Bitcoin mining companies. By picking the fittest companies with the lowest mining and business costs, strong liquidity, and clear expansion plans, there is still a potential silver lining.

The upcoming Bitcoin halving event promises to be a game-changer, and the next few years hold tremendous opportunities for investors in the crypto sector. Whether it's Bitcoin or mining companies, a well-informed approach is key to navigating this dynamic and thrilling landscape.

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