Bitcoin is the cryptocurrency of the future. However, that does not mean that Bitcoin will have a linear line upwards to eventually replace fiat currency.
No, that will definitely not happen.
Instead, the price of Bitcoin operates in cycles – it goes up and it goes down. Fortunately, investors can take advantage of the fact that Bitcoin operates in cycles to make a massive profit. This article will cover exactly how you can do that.
Basic Assumptions About Bitcoin Cycles
There are a few assumptions about Bitcoin cycles that we must make before we can make any money. Now, accurate theories will have the least amount of assumptions possible, so we will not spend too much time on the assumptions.
However, the assumptions about Bitcoin cycles, and the subsequent impact on price, are almost not even assumptions at this point.
The Price of Bitcoin Increases After a Halving
The first major assumption about Bitcoin and its price is that the price of Bitcoin always increases after a halving.
This does not mean that the price increases instantly after a halving. Rather, the pattern is that the price of bitcoin will eventually increase after the halving
It typically takes about a year for the price to increase after the halving. But it will increase by such a large amount that it has always resulted in a bull market.
The bull market following a halving will always exceed the previous all time high by a large percent as well, which is important to understand to take advantage of the cycle.
What Is a Bitcoin Halving?
To understand Bitcoin cycles, you first must understand Bitcoin halvings. Fortunately, Bitcoin halvings are a very simple concept to understand. They are even outlined by Satoshi Nakomoto as an integral part of Bitcoin as they prevent inflation.
Anyway, a Bitcoin halving is when the block reward for mining a bitcoin block is cut in half. This occurs every 210,000 blocks, which comes out to about every four years.
Bitcoin originally started with a 50 BTC block reward, but this has halved over time. Currently, the block reward is 6.25 BTC per block mined with the last halving occurring on May 11, 2020. Unsurprisingly, a Bitcoin bull market followed the halving a few months afterwards.
Taking Advantage of Bitcoin Cycles
So, we have covered how Bitcoin cycles work – they are always based on the halving of the block reward in Bitcoin, which is a hardcoded feature of Bitcoin. We can use this information to now make a hefty profit. Here is how you can do that.
Buy The Bear Market Preceding The Halving
The biggest way to take advantage of Bitcoin cycles is to simply purchase bitcoin during the bear market that always precedes an upcoming halving.
For instance, the last bear market in bitcoin lasted from early 2018 to the end of 2020. The price of bitcoin during this time fell to approximately $3,000 at its absolute lowest. And the price stayed under $10,000 for a decent amount of the bear market.
Of course, this all changed after the halving in May. The price of bitcoin recovered quite nicely and anyone that purchased bitcoin during that bear market would have a minimum profit of 3x (up to 10x).
With that in mind, the easiest way to take advantage of Bitcoin cycles is to simply buy bitcoin during the bear market. Yes, it really is that easy.
Always Dollar Cost Average (DCA)
One other thing to note – always buy bitcoin by dollar cost averaging (DCA). The time frame does not matter. You can buy any amount of bitcoin over any time period, but try to make it consistent. Obviously, if the price of bitcoin goes down by a large amount, then it makes sense to purchase more during that time.
What you want to avoid is buying a large amount of bitcoin at one time as a way to sort of “buy the dip.”
You most likely will not buy the absolute bottom, and you will spend a large amount of time attempting to find the absolute bottom. It’s a better use of time to automatically buy $xxx amount of bitcoin every week no matter the current price of bitcoin.
This can actually be automated on Gemini, but the process is easy enough to do on any exchange like Coinbase Pro.
Next up, make sure not to sell your bitcoin during the downswing cycle.
That is actually the worst thing you could do because it locks in your losses. The benefit of not selling is that there is always a chance that bitcoin recovers.
And based on history, Bitcoin always recovers past previous all-time highs, so selling is a very bad idea. You should avoid selling your bitcoin, especially at a loss, at all possible costs.
Yes, that means you should figure out a way to make extra income rather than selling your bitcoin for income. And do not blow all your bitcoin on a Rolex or other luxury goods meant to show off.
That bitcoin could be worth millions one day if you hold it.
Store It On a Hardware Wallet
Finally, you really should be storing your bitcoin on a hardware wallet. Desktop wallets work, but they are not nearly as secure as a hardware wallet.
We recommend a Trezor or Ledge hardware wallet. They are easy to set up, easy to use, affordable, and extremely secure. Just make sure that you keep the recovery seed secure and you will have no issues with security with either device.
The problem with storing cryptocurrency on an exchange is that exchanges can get hacked. In fact, many cryptocurrency exchanges have been hacked in the past. We know this is not particularly likely with the large exchanges like Coinbase or Binance, but it can happen on any exchange.
Exchanges may also prevent you from withdrawing cryptocurrency (or fiat) later on if they have a shortage of cryptocurrency (or fiat). Many have suspected this is the case with BlockFi after some users have reported difficulty withdrawing fiat currency from the platform.
To summarize, avoid keeping your cryptocurrency on exchanges for an extended period of time. And especially if you have a large amount of cryptocurrency on the exchange.
Well, that sums it up for how to take advantage of bitcoin cycles. As we mentioned previously, it really is not that difficult. Just dollar cost average the entirety of the bear market and the price should increase by a large margin a year (or less) after the block reward is halved.