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April 17, 2024

Why Bitcoin’s Latest Dip is Great News for Savvy Investors

April 17, 2024

Bitcoin has just experienced a significant pullback, dropping over 15% from its all-time high just a month ago. This decline has sparked widespread discussion among investors and enthusiasts alike, leading many to ask, “why is Bitcoin down?” and “how long will the Bitcoin dip last?”

Understanding these market movements is crucial for identifying investment opportunities, especially with the upcoming Bitcoin halving event this Friday, now just two days away!

Why is Bitcoin dropping?

Although there has been a slowdown in the pace of the cryptocurrency markets over recent weeks, macro developments served as the impetus for last Friday’s fall. Commodity markets became uneasy due to growing concerns of a military confrontation between Israel and Iran. 

Bond rates and the value of the US currency also increased significantly as investors discounted rate cut expectations against positive U.S. economic data and growing worries about persistent inflation.

This recent downturn is tied with broader economic uncertainties, including fluctuating stock markets and geopolitical tensions, which have also played a role in influencing Bitcoin’s price.

The Silver Lining: The Final Buying Opportunity Before the Halving

The good news is that a 15% pullback, while substantial, aligns perfectly with the typical “pre-halving dips” observed before previous halvings, and these have been historically followed by major bull markets.

These dips have often served as the best buying opportunities before the onset of major bull markets driven by the reduced supply of Bitcoin following the halving. 

Bitcoin Halving Progress Chart Via Bitbo
Bitcoin Halving Progress Chart Via Bitbo

Given the broader economic context, including geopolitical tensions and shifts in the U.S. bond and currency markets, the dip not only reflects short-term market fears but also sets the stage for potential long-term gains. 

For those looking to invest in Bitcoin, this moment could represent a strategic entry point right before the halving is anticipated to trigger a new rally in the cryptocurrency market.

What is the Bitcoin Halving?

The Bitcoin halving is a scheduled event that occurs approximately every four years, where the reward for mining new blocks is halved, effectively reducing the supply of new Bitcoins entering the market. This event has historically been a precursor to significant price increases due to the reduced supply growth.

Why the Dip May Be a Huge Opportunity

For savvy investors, the current dip could present a unique buying opportunity. Past halvings have typically been followed by substantial rallies in Bitcoin’s price, as the reduced supply of new coins helps drive up demand. 

Global Cycle Low Price Chart via GlassNode
Global Cycle Low Price Chart via GlassNode

With the next halving set for 19 April 2024, the current lower prices could offer a strategic entry point before we see the first halving in history after Bitcoin ETFs opened up the market to a massive wave of potential new ETF investors

For an indication of how this halving could play out differently this time, we just have to look at the “Gold Fractal”.  The Gold Fractal refers to the price trajectory of gold following the launch of its first ETFs in 2004, which preceded massive appreciation due to increased accessibility and investment flows. 

This historical precedent serves as a key reference point for analyzing Bitcoin’s potential growth trajectory in this first halving cycle post-ETF.

Average annual gold price after first US gold ETF was approved
Average annual gold price after first US gold ETF was approved

Impending Supply Squeeze: Bitcoin Balances on Exchanges Hit New Lows Ahead of Halving

Despite the recent volatility, the sentiment among long-term investors remains extremely bullish. The fundamentals of Bitcoin, combined with growing institutional interest and the increasing integration of Bitcoin into mainstream finance in the form of ETFs, suggest a bright future. Furthermore, the reduction in market leverage and resulting healthier market conditions post-correction suggest that Bitcoin is poised for recovery.

This is reflected in the Bitcoin balance on exchanges that has been steadily decreasing since January even in the face of recent volatility. This trend indicates a coming supply squeeze, as less Bitcoin is available for trading. 

Bitcoin Price vs Bitcoin Balance on Exchanges Via Coinglass
Bitcoin Price vs Bitcoin Balance on Exchanges Via Coinglass

Currently, with under 1.75 million Bitcoin remaining on exchanges, the scenario of a supply squeeze appears increasingly likely. This diminishing availability of Bitcoin is extremely bullish as we head into the Bitcoin halving event that will cut the new supply of Bitcoin in half. 

The intersection of reduced balances on exchanges and the upcoming halving could lead to a supply shortage much sooner than many market participants anticipate. Such a scenario would likely exert massive upward pressure on Bitcoin prices, making this a critical moment for investors to watch closely.

Key Takeaways for Investors

Investors considering Bitcoin should look beyond the immediate price fluctuations and consider the broader implications of the upcoming halving and its historical impact on the market in combination with the impact of the Bitcoin ETF on the anticipated price trajectory, in combination with the anticipated supply squeeze resulting from falling balances on exchanges. 

While the timing of market recovery is uncertain, the long-term prospects for Bitcoin remain strong, making this dip a potentially advantageous buying moment.

While the recent price drop may seem daunting, it opens up opportunities for those looking to invest in Bitcoin before the halving triggers another potential price surge. Savvy investors will watch these developments closely, and make their move.

As always, this article does not constitute financial advice. You should be sure to do your own research and consult a professional financial advisor before making a major investment decision.

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