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Coinbase Institutional penned a primer for investors ahead of the halving.
The fourth bitcoin halving is set to take place in mid-April. Halvings take place every four years, or every 210,000 blocks. This year’s halving will take place when the 840,000th block is mined, where miners’ rewards will drop to 3.125 bitcoin per block from 6.25.
The handbook from Coinbase was written with institutional investors in mind and details the previous halvings to give insights into the past trends. However, this halving looks slightly different due to the recent entrance of bitcoin ETFs on the market, and bitcoin hitting an all-time high in the run-up to the halving. Previously, bitcoin hit all-time highs in the months after each halving.
Read more: The Bitcoin halving is about a month away — here’s what you can expect
Though, as analysts note, the first halving saw a huge bump for bitcoin in the months leading up to the event.
“Bitcoin traded up 139% in the six months leading up to the first halving and then rocketed 923% higher in the six months post-halving. Of course, these were early days for bitcoin, which was trading at just over $5 six months prior to that halving, and the performance around subsequent halvings hasn’t been nearly as strong,” Coinbase wrote.
There wasn’t as big of a move ahead of the second halving, but bitcoin topped $1,120 in the 12 months after the event. The third halving, which took place in 2020, actually saw bitcoin dip before gaining momentum post-event.
Read more: Bitcoin halvings may be bullish — but returns have shrunk every cycle
Coinbase analysts think that it’s “easy to extrapolate” that bitcoin can continue its run-up leading into the halving, noting that bitcoin is up 157% since October.
Investors should, the note cautions, be careful about their approaches to bitcoin.
“While it’s possible that the halving could have a positive impact on bitcoin’s performance, there’s still only limited historical evidence about this relationship, making it somewhat speculative,” analysts wrote.
There are bullish signs going into the April halving, including the Federal Reserve’s potential schedule for rate cuts, which could see the first cut in May.
“The current cycle most closely resembles the period from 2018-2022, during which bitcoin gained 500% from its cycle low,” Coinbase said.
Read more: The history of Bitcoin halvings — and why this time might look different
“Another interesting data point to consider is the total supply of bitcoin held by long-term holders…Historically, this duration marks the point beyond which the probability of these assets being sold decreases notably. All other things equal, long-term holders should be less likely than short-term holders to view halvings as an opportunity to sell into strength,” analysts continued.
Per the Coinbase data, Glassnode defines long-term holders as investors who hold for 155 days at the minimum.
However, there’s also the possibility that miners sell more due to the lowered rewards, as well as increased selling pressure from the companies exiting or finalizing their bankruptcies.