Bitcoin halving to have impact on price
Bitcoin halving is core to Bitcoin's economic model for ensuring Bitcoin issuance through mining takes place at a steady and predictable pace. With halving mining rewards for miners are cut by half. It takes place every 4 years with the first one taking place in 2012 where block rewards were cut from 50 Bitcoins to 25 Bitcoins. The second halving took place in 2016 when the mining rewards were halved to 12.5. The next one is slated for May 2020 with mining rewards dropping to 6.25 Bitcoins. Historically, Bitcoin halving has been a major catalyst for driving Bitcoin price up. With every halving, the supply of Bitcoin in the market reduces stimulating demand as more users join. Only 21 million Bitcoins will ever be mined and halving is a deflationary measure meant to increase scarcity of Bitcoin in circulation. This is a major difference between Bitcoin and existing fiat currencies which have infinite supply and are prone to higher rates of inflation. As demand for Bitcoin rises, the supply reduces and has a positive impact on Bitcoin price. The upcoming halving will reduce the Bitcoin supply schedule from 657,000BTC to 328,500 BTC per year. Each halving saw Bitcoin record a new all-time high (ATH) with post-halving growth more than 5 times larger than pre-halving growth according to analysis by Rekt Capital.
Ways of investing in Bitcoin
With the upcoming halving, many investors are looking for ways to capitalize on the gains. There are various ways to invest in Bitcoin such as
Mining is capital intensive and requires cold weather conditions in order to make profits. Therefore only big mining firms currently operate in the space. Majority of people choose to buy Bitcoin and holding or HODL and then benefiting from price appreciation. This method entails buying and storing Bitcoins mostly in cold storage wallets and selling when the price appreciates.
Bitcoin trading is a more widely adopted method of investing in Bitcoin. Spot trading is available on many exchanges involving buying and selling of Bitcoin and other cryptocurrencies with immediate delivery. Spot trading is widely adopted way of making profits in the industry since even inexperienced traders can learn fast and use it. Nonetheless, it has also limitations such as high commissions and potential high losses without proper risk management.
There is also the vulnerability of hacking and loss of coins on most exchanges that do not have high-security measures.
As the market grows the need for more opportunities for traders to hedge against falling prices and profit from rising prices has led to the rise of derivatives markets, especially perpetual contracts.
Cryptocurrency derivatives are a better investment tool to benefit from Bitcoin price movement. The most popular types of derivatives in Bitcoin trading are Bitcoin perpetual contracts.
Perpetual contracts enable traders to hedge, providing more flexibility and risk management opportunities. Furthermore, perpetual contracts do not expire meaning traders can hold positions for as long as they want and capture more profits.
In addition, trading perpetual futures is more attractive because of low commissions and convenience of capturing profits without settlement. Bitcoin perpetual contracts provide users with returns of Bitcoin price change of the underlying spot market with an added advantage of leverage. Leverage means that a user with a few Bitcoins can benefit more with perpetual contracts than any other type of trading. Some exchanges allow different types of leverage.
One of the main crypto derivatives exchanges that offer perpetual contracts is C-Trade. C-Trade offers 150x leverage perpetual contracts. For a trader looking to make returns this means that a deposit of 1 Bitcoin can open a position of 150 BTC. Essentially do more with less.
Such a trader captures more profits than normal spot trading. The price movement from Bitcoin halving is not instant but takes place over the course of weeks and months. Perpetual contracts enable traders to take profits over an extended period of time. Perpetual contracts enable traders to instantly realize their profits and shield them from volatility. Given that the Bitcoin market operates 24/7, continuous settlements through perpetual contracts are the best way traders can make up to 300% profit in the upcoming Bitcoin halving. Whenever price moves in traders favour, profits are available immediately and a trader can open another position or withdraw. Traders have options to use more flexible trading strategies opening both short and long positions.
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