The highly-anticipated Bitcoin halving is just one week away leaving traders and investors undecided on whether it will break out above $10,000 or suffer a correction back down to around $5,900.
The indecision has been reflected in the past week of price action with Bitcoin struggling to close daily candles above $9,000 while remaining firm consistently closing above $8,600.
The Bitcoin halving is undeniably a bullish event. However, if you look at previous block reward halving events price always seems to correct in the months following the halving before picking itself back up later on in the year.
In 2016 Bitcoin suffered a 30% sell-off after the halving before taking a year to begin its rally to a new all-time high.
During an event like this it is important to factor in three variables; the fundamental impact of the halving on Bitcoin’s supply, the worryingly bullish sentiment and the technical aspect of Bitcoin’s chart.
The former is common knowledge, if you cut the supply of any asset in half price will eventually rise if demand remains the same.
The second point can be perceived in a few different ways, when investors are overly bullish and optimistic about an asset price action often goes the other way in order to cause the maximum amount of pain. But it can also have a positive impact on price action if the positive sentiment brings in more investors to a point where there are far more buyers than sellers, which would cause the price to rise.
From a technical standpoint Bitcoin needs to break above $9,600 to confirm a bullish breakout, this would bring around initial targets of $10,300 and $10,550, although it could go far higher as the diagonal trendline would be broken for the first time since it began in 2017.
However, if Bitcoin begins to sell off as it has done on each touch of $9,200 it could cause a cascade of sells and liquidations of long positions, which brings price targets of $7,800 and $5,900 into the frame.
For more news, guides and cryptocurrency analysis, click here.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.