Bitcoin plunges before halving

The sharp decline in Bitcoin before the halving is usually caused by adjustments in market expectations, short-term speculators closing positions and miner pressure. Within the halving window (2-4 months before halving), there has been a decline in the three halvings in history: 2012 (44%), 2016 (27%) and 2020 (18%). The magnitude of the decline is affected by factors such as overall market sentiment, altcoin performance and macroeconomic events.

The period of sharp decline before Bitcoin halving

The Bitcoin halving event, that is, the block reward reduction Halvings often result in large price swings, including large pre-halving drops.

Cause

The big drop before halving is usually caused by the following factors:

• Market expectation adjustment:Investors anticipate a sharp price increase after the halving, so sell Bitcoin before the halving to lock in profits.
• Short-term speculators close their positions: The eve of the halving has attracted many short-term speculators, who buy Bitcoin for profit. Once the price reaches the target, they will close their positions and leave.
• Miner Pressure: As block rewards decrease, miners’ costs will rise and they may need to sell Bitcoin to cover expenses, leading to selling pressure.

Typical period

The big drop before Bitcoin halving usually occurs 2-4 months before the halving date. This period is called the halving window.

Historical Data

The past three Bitcoin halvings have all seen declines within the halving window:

• 2012 Halving: Down 44%
• 2016 halving: down 27%
• 2020 halving: down 18%

Influencing factors

Factors that affect the magnitude of the decline within the halving window include:

• Overall market sentiment: Bullish sentiment will mitigate the magnitude of the decline, while bearish sentiment will exacerbate the decline.
• Altcoin Performance: If altcoins perform strongly, it may attract capital outflows from Bitcoin.
• Macroeconomic events: Major economic events (such as recessions or central bank policy changes) may affect Bitcoin prices.

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