Bitcoin is about to enter the 'danger zone'

Bitcoin is predicted to drop sharply in price before the halving event at the end of April, but digital currency players are still optimistic.

"In the next few days, Bitcoin will officially enter the 'danger zone', a process of sharp price decline, which has happened in previous halvings," famous cryptocurrency analyst Rekt Capital commented on X March 18.

To limit inflation when too many people participate in mining digital currencies, Nakamoto Satoshi - the father of Bitcoin - added a code so that after every 210,000 mining blocks, the reward for miners will be halved. This algorithm is called Bitcoin halving and occurs on average every four years. In early 2012, the reward was reduced from 50 to 25 Bitcoins per block. The fourth halving is scheduled for April 20 and at that time, miners will only receive 3,125 Bitcoin when opening a new block.

What is Bitcoin halving?

Greed and fear index displayed on the Binance app. Photo: Bao Lam

According to Rekt Capital, halving history shows that Bitcoin price will drop sharply within 14-28 days before the event, also known as the "danger zone". The biggest drop was in 2016, when the digital currency plunged 40%, while in 2020, Bitcoin's price dropped 20%.

There are 31 days left until the next halving, but CoinMarketCap reports that Bitcoin has dropped 10% from its all-time high on March 14 of $73,835 to $63,000 per coin.

Despite falling prices, cryptocurrency players believe the market will increase sharply this year. Because the amount of Bitcoin rewarded to miners is reduced, the price of this coin often peaks within a year after the halving. According to Binance's greed and fear index chart, players are currently leaning towards "greedy" with 79 points, meaning they are actively buying instead of selling.

In the field of cryptocurrency, the fear and greed index is an important factor expressing player psychology. Investors often tend to be greedy when the market increases, leading to FOMO (fear of missing out). Meanwhile, they can sell off assets when the market continues to decline. This index becomes a reference to help investors not fall into the psychological trap of being too worried or too excited.

Experts are also optimistic when Bitcoin goes down. According to CNBC , Kris Marszalek, co-founder and CEO of Crypto.com, assessed Bitcoin's recent price drop as a "healthy move".

Richard Teng, CEO of Binance, expects Bitcoin to continue breaking records, surpassing $80,000 by the end of the year as supply decreases and demand increases, but emphasized that growth is not "straight line", but price fluctuations will happens along the way.

However, according to CoinTelegraph , holders of digital currencies other than Bitcoin will experience some major "shakes" before thinking about making a profit. "When Bitcoin increased strongly, other cryptocurrencies only increased slightly. But when Bitcoin decreased, a series of cryptocurrencies plummeted even more," this page commented.

Bao Lam

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