Bitcoin’s recent performance is reminiscent of its behavior during a previous halving cycle. What can we anticipate from the upcoming halving event?
After the U.S. SEC approved spot ETFs on January 11, Bitcoin (BTC) embarked on a bullish streak, reaching impressive heights. The cryptocurrency hit a record high of $73,750 on March 14. However, this peak was short-lived as Bitcoin faced a correction, dropping to levels around $60,000 to $61,000 on March 20.
Despite this dip, Bitcoin managed to recover amid positive sentiments and is currently trading at around $63,000 as of March 22. A report by Coinbase highlights that Bitcoin’s current trajectory mirrors its behavior from 2018-2022, where it saw a remarkable 500% increase from its lowest point in the cycle.
For those unfamiliar, the Bitcoin network undergoes a halving event approximately every four years, reducing the rate at which new Bitcoins are generated. This built-in feature of Bitcoin’s code is designed to manage its inflation rate. Historically, Bitcoin has followed a pattern surrounding its halving events, experiencing a price surge leading up to the halving, followed by a period of correction or consolidation before reaching new highs post-halving.
Let’s take a deeper look into Bitcoin’s past cycles, analyze its behavior, and predict its potential direction in the current cycle.
The First Halving: 2012
The initial halving event in 2012 decreased the block reward from 50 to 25 BTC, slowing down the introduction of new Bitcoins into circulation. During this time, Bitcoin was relatively unknown outside of niche tech communities. It wasn’t until the price surged from double digits to over $1,000 in 2013 that it caught mainstream attention.
Despite the increase, the broader financial industry dismissed Bitcoin as a passing trend, failing to grasp its potential. Following the rapid rise, Bitcoin experienced a swift correction, with prices dropping back to around $200 by 2015. Critics prematurely declared the demise of Bitcoin, attributing it to a burst speculative bubble. However, subsequent cycles proved otherwise.
The Second Halving: 2016
In July 2016, Bitcoin underwent its second halving, reducing the block reward from 25 to 12.5 BTC. This event garnered widespread attention as Bitcoin was already gaining traction in mainstream financial circles.
Leading up to the 2016 halving, Bitcoin displayed a somewhat bullish trend. By June, prices had climbed from around $430 to over $750. However, as the halving approached, the price experienced volatility, dropping to around $590 by the end of June.
Following the halving, Bitcoin entered a phase of consolidation, trading sideways for several months. Nevertheless, the effects of the halving began to materialize, and by December 2017, approximately 1.5 years post-halving, Bitcoin had surged to new highs, surpassing $19,000 with over 12,000% gains in that cycle.
The Third Halving: 2020
Preceding the 2020 halving, Bitcoin underwent a consolidation phase. In early January, prices fluctuated in a narrow range of $7,000 to $7,500. As the year progressed, Bitcoin’s value saw modest gains, reaching around $9,000 in anticipation of the halving.
Following the halving, Bitcoin experienced a notable increase in momentum as the supply of new coins became scarcer. By November 2020, Bitcoin had surged to around $15,000, marking a significant rise from pre-halving levels. This upward trend continued, culminating in Bitcoin reaching a new all-time high of nearly $69,000 in November 2021.
Bitcoin gained approximately 2,000% during this cycle, signaling a lower growth rate compared to previous cycles but still significant. Despite the challenges posed by the COVID-19 pandemic, Bitcoin’s price behavior remained consistent with the established cycle, showcasing its resilience in the face of external disruptions.
Prominent institutional investors like Paul Tudor Jones and Michael Saylor publicly announced their Bitcoin allocations during this period, indicating a growing acceptance of the cryptocurrency among traditional investors.
The third halving cycle reiterated the familiar pattern observed in previous cycles: a price surge leading up to the halving, followed by a brief correction and consolidation phase before a significant bullish phase. The peak typically occurred around 18 months post-halving, aligning with historical trends.
What Can We Expect from the Next Halving?
Reddit users suggest that we may be on the brink of a bull market, with the upcoming halving event playing a significant role. The approval of spot BTC ETFs is seen as a transformative development, signaling Bitcoin’s move from the fringes to mainstream finance.
Renowned crypto-analyst Michaël van de Poppe shares this sentiment, suggesting that we are entering an “institutional cycle” characterized by substantial capital inflows into the market, as evidenced by recent ETF activities. According to van de Poppe, this paves the way for a bull cycle unlike any seen before.
Van de Poppe challenges the “diminishing returns” theory, arguing that technological advancements and institutional investments could lead to unprecedented market highs, with peaks potentially reaching $250,000 to $600,000 or even higher.
He speculates that we might be approaching a “Crypto Dot.com” bubble, drawing comparisons to the dot-com bubble of the late 1990s. However, he anticipates that this crypto cycle could last longer, influenced by economic factors like liquidity and interest rates.
Van de Poppe cautiously predicts a peak in Q3/Q4 2025, with the possibility of the bull cycle extending into 2026 or 2027, depending on economic conditions. He warns of a subsequent crash and advises investors to focus on purchasing power rather than USD valuations.
Looking Ahead
Experts anticipate that the next Bitcoin halving will likely occur around late April, possibly extending into May. Each halving event brings its unique market patterns, and the upcoming one will be no exception. Brace yourself for fluctuations, and approach your trades with caution.
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