Bitcoin’s halving event is a cornerstone of its economic model, designed to reduce the rate at which new coins enter circulation by approximately every four years. This mechanism introduces a deflationary aspect to Bitcoin and tends to trigger significant shifts in its market valuation. This article offers a granular look at the price action 60 days post-halving, examines Bitcoin’s historical cycles, and assesses the factors that could dictate its future price movements.
Price Action Review
What the previous cycles have in common is that the price sooner or later began to multiply after the halving. What did it look like exactly?
2012 – 2016 Epoch
Brutal price adjustment after the first halving.
Just two months after the reward for the mined block has been halved for the first time, the price has already increased by over 40%. It should be noted, however, that the overall price increase from the halving to the local peak was the largest at that time, and BTC is still subject to the law of diminishing returns.
By April, the price increased by almost 2,000%, and in a year, by an unimaginable 9,000%. In terms of two tops, this cycle is significantly similar to 2020 – 2024, which will be discussed later.
2016 – 2020 Epoch
Second halving: parabola with delayed ignition.
The situation after the second halving was slightly different than after the first one. Investors encouraged by the “instant” increase had to be patient – the beginnings of a parabola (called “banana zone” in investor jargon) can only be seen in December, i.e., 5 months after the reward for the mined block was halved. What’s more, 60 days later, the price even… dropped by around 6%.
The local peak occurred later than last time, about 17 months after the halving. At the end of 2017, the increase was still a jaw-dropping 3,000%.
2020 – 2024 Epoch
Third and fourth halving – price action.
As you can clearly see, 60 days after the block reward halving, the price was still in consolidation, being approximately 7.5% higher. The parabolic growth started in October, just like in 2016 – 2020… also 5 months after the halving.
Returning to the 2012 – 2016 Epoch, it can be seen that, just like then, we achieved a double top. The only difference is that the price reached similar levels this time, and after the first halving, the second peak was much higher than the first. Still, the overall growth was almost 700% in a year, which is a result rarely seen in the other markets.
That’s not all! Although the halving III took place in the spring and the first one in autumn, it was this time of year that the banana zone started during each Epoch. The first peak occurred here and there in April and the second one at the end of the year. What a coincidence!
2024 – 2028?
The fourth halving: navigating uncharted territory.
Millions of investors are wondering what’s next? None of us have a crystal ball (and even if we did, would we talk about it?) and can’t say for sure what will happen.
Bitcoin is currently in a critical place. We are hovering near the price from the top of the previous cycle, and it should be noted that this has not happened so far right after the halving!
As you can see, introducing ETFs has seriously changed the market trajectory. So far, during halvings, the price has been about half of the peak value from the previous cycle (currently, it is about $35k). The value of BTC was indeed this much in October 2023, when the hype for introducing ETFs began. The price has since doubled and is 40% higher since its launch.
Currently, BTC is kissing the 100-session exponential moving average, which has been the support in the bull markets so far.
The price is at a similar level to that at the halving, which coincides with the behavior of the previous two eras. If these events were to be repeated, 5 months from the halving of the reward for the extracted block occurs at the end of September.
So what’s next? Nobody knows that. All we know is that the halving occurred, and the rate of supply growth dropped by 50%. How will this affect the price? This will depend on the demand for this currency, which cannot be precisely predicted.
Factors Influencing Bitcoin’s Growth
Bitcoin’s trajectory is not just a function of market dynamics but also a reflection of broader economic, technological, and regulatory trends. Understanding these factors is crucial as they shape the current value of Bitcoin and its future viability and acceptance across global markets.
In Favor of Growth
- BTC ETF Introduction: The introduction of Bitcoin ETFs provides a regulated and straightforward pathway for institutional investors to enter the Bitcoin market. This could lead to significant capital inflows, lowering barriers to entry and potentially influencing the price.
- Falling Quantity of BTC on DEXs: Observing the trends on decentralized exchanges (DEXs), where the quantity of Bitcoin is falling, suggests that more investors see BTC as an asset held for the long term. This “hodling” behavior reduces market supply, which may support price increases amid steady or growing demand.
- Economic Conditions Favoring Risk Assets: With the FOMC projecting lower federal funds rates in the coming years, traditional investments may yield lower returns, potentially making Bitcoin an attractive, higher-risk, higher-return investment.
Against Growth
- Regulatory Risks: Increasing regulatory scrutiny in major markets, especially the United States and Europe, could impose significant barriers to the adoption and operation of cryptocurrency. Regulatory headwinds could lead to heightened volatility and deter new investors.
- Market Saturation and Technical Scalability Issues: As more players enter the market and Bitcoin continues to scale, ongoing transaction speed and costs could become more pronounced, potentially hindering further adoption unless addressed by technological advancements like the Lightning Network.
- Diminishing Returns: As Bitcoin matures and gains more mainstream acceptance, the massive gains that were seen in the early years are becoming less frequent. This trend of diminishing returns could temper investor enthusiasm, especially among those new to the market expecting rapid and significant profits.
Conclusion
Understanding its cyclic patterns and market influences becomes increasingly vital for investors as Bitcoin matures. While historical trends suggest a potential for significant growth post-halving, the landscape is evolving with greater regulatory and market maturity. Investors should consider both the cyclical opportunities and the structural challenges as they navigate their investment decisions in Bitcoin.
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