A massive drop in Bitcoin’s price over the weekend has wiped many long positions over the weekend ahead of the halving
Bitcoin dumps usually happen in the aftermath of halving events, but it could be that large investors are trying to sell their Bitcoin off before the post-halving drop to get a better price for taking their profits.
The problem is this; with each halving that goes by, people begin to think it will be more simple to predict what Bitcoin is going to do next.
Not only are traders trying to guess how Bitcoin will react to the markets, but they are also trying to guess how others will behave.
Bitcoin is no stranger to ‘pump and dump’
For the majority of last week, it looked as though the price of Bitcoin was pumping. This year’s halving attracted unparalleled internet interest, which as usual brings with it a wave of small scale buyers. New traders tend to be less well informed, but more eager than most to get aboard the bullish train.
We also know that miners tend to stockpile their coins in the run-up to halvings in order to sell them afterwards at a high price; whereas mining enters a period of reduced profitability.
Except, of course, that because this is so well documented some people realised that, why stick to a script with an arbitrary sell point? Why not write the script?
People invest in crypto for a variety of different reasons and if you are going to invest in crypto you should be aware that not everyone’s investment goals mirror your own.
If you have a long term investment goal, or are keen to use a currency not administered by a central bank, you shouldn’t react negatively to price moves caused by short term traders. Better yet, why not have a strategy that allows for moves like this one without affecting you negatively. Manage your risks, as well as your expectations.
In the absence of an effective crypto-crystal ball, the best we can do is use our best judgement. At the time of writing, there are about 14 hours left until the halving is predicted to occur. A lot could happen. Bitcoin’s price could rise again, although by how much, is hard to say.
What is more likely to happen is that there will still be a price drop at some point after the halving. There will be a lot of miners out there still, with plenty of Bitcoin still to sell. And whilst prices are below $10,000, selling at around $8,600 will still yield a sizeable profit. Let’s not forget that two months ago, prices were below $5,000.