What should we expect to see happen around Bitcoin's next halving event?
Bitcoin is set to see it's next halving event on May 12th, which is roughly 8 days away from today.
It's coming quickly and I have seen a lot of people talking about what could happen around that time in terms of price action.
Are we going to see a pump, a dump, or just a big pile of nothing?
In order to get some kind of guess we should look to see what happened in the past...
I dug up a chart showing the returns on bitcoin 6 months out following the last halving event, which took place in July of 2016.
As you can see, it was quite bullish for the price:
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Following the last bitcoin halving, bitcoin saw returns of 38% in the 6 months following the halving.
Nothing to sneeze at, however, if we really dig into those numbers it gets even more interesting...
2016 Post Halving Numbers...
One thing that stands out to me looking at the chart posted above, is what happened immediately following the halving...
Immediately following the halving, we saw a rather substantial dip.
Prices dropped from a little under $700 all the way down to a shade over $500 within the first month after the halving.
That represents a drop of about 25%.
Not only that, but also looking at the above chart, we see that prices ran all the up to almost $1,200 before pulling back substantially right at the end there to end the 6 month window with those 38% gains.
Given that information, it actually makes those 38% gains look rather paltry...
Had you bought that initial dip, and gotten bitcoin somewhere in the low $500's, you could have easily realized a heck of a lot more than that 38% gain over that 6 month stretch...
If you somehow managed to get the top there, you would be looking at gains of close to 120%!
It is darn near impossible to time things perfectly like I am suggesting here, but the point is that the 38% number is nice, but it actually could have been a lot bigger for some astute traders.
And again, we are just talking about the first 6 months post halving, the next 6 months returned significantly higher returns...
Ok, so the last halving was wildly bullish for the price, what about this time?
That is the 64 thousand dollar question.
The bitcoin market is very different now than it was back then. It's much more known about, already worth significantly more, and there are robust futures/options markets that allow miners to hedge in a way that was not possible previously.
Add all that up and it may throw previous patterns out the window.
That being said, I still believe the supply/demand economics will still work in a positive way on prices in the medium to longer term regardless of everything mentioned above. If demand stays roughly the same but new supply decreases, we would see prices going higher.
If demand were to increase, say because prices are going up and people don't want to miss out on the next big run, well then you see crazy things happen like where bitcoin went from $1k to $20k in about 6 months time after the last halving.
I think that right there is exactly how and why these cycles happen and are so predictable.
At our current time, bitcoin is at an inflection point:
(Source: https://twitter.com/CryptoCompare)
Given the fact that it has already run up significantly in the preceding weeks, and is at the top of this channel heading into the halving, I would not be surprised to see a major dip after the halving yet again.
Very similar to what we saw in 2016.
I don't think it will trade all the way down to the bottom of this channel, but something in the realm of a 25-30% drop again seems highly possible and would take prices to about the midpoint of the above channel.
Something in say the $5k-$7k range.
That being said, like in 2016, I think we are ultimately going to see a massive rally start from that dip. A rally that takes prices well beyond previous highs.
I don't want to speculate on how high it might go, but the previous halving saw prices go 20x the previous highs in about a year post halving. A similar move would take bitcoin to $400k by May of 2021.
I am not counting on that happening this time around, but I would not be surprised to see $100k hit at some point before the end of 2021.
It's a nice big round number and seems well within striking distance based on past halving patterns.
Stay informed my friends.
-Doc
Miners have known the deal for quite some time now.
There will be no capitulation.
This halving will look nothing like the previous 2.
All the variables are different.
We've bounced off the doubling curve 4 times in the last 4 days.
Coinbase needs to deposit my stimulus already :D
isn't the US stimulus a cheap loan?
It was a free check for $1,200. Not nearly enough for most folks, but they did beef up unemployment insurance which covered most people that lost their jobs due to the shut down...
didnt trump said US had the best economy ever? sooo many new jobs....
It did before things were purposely shut down... The thing about being purposely shut down likely means there is some pent up demand which is hard to account for, I suspect that as things start to open back up we will see one of the fastest recoveries ever. Plus more stimulus is probably on the way as well.
It was more like a free $1200.
It's not just about miner capitulation, there is also a kind of sell the news event where the price runs up prior to the event, and then when the event actually happens and price doesn't immediately moon, the fast money guys sell the news and price pulls back for a bit. I think we could still see a drop in bitcoin even if there is not much miner capitulation, especially since bitcoin has run pretty well over the last month.
Okay, yes, but what I'm saying is that we already sold the news (COVID).
Now we are trading at the baseline;
The baseline that we were supposed to crash to in the first place.
Trust that I will be surprised if we dip back below $8400.
Last halving the market tried to foolishly price it in.
That didn't happen this time.
There is no news to sell because no one bought the news.
Well searches for "bitcoin halving" have been skyrocketing on google for a couple weeks now, and we saw bitcoin rally from about $7k to $9.5k during this same time period... Given that, I would not be surprised to see a retrace down to $7k, possibly into the $6k's post halving once price doesn't immediately moon.
I do concede that the drop we had down to $3.8k wasn't a normal drop and wasn't "supposed" to happen, but people tend to trade recent price action and not where prices were "supposed" to be going in. If they bought at $7k and the price is $9k, and things start to look weak, there is a good chance they pull the sell trigger, irregardless of the fact that the price "should" have been trading for $10k going into the halving flat. IE, the dip creates sellers as they are sitting on profit that they otherwise wouldn't have been.
I wrote in in the other comment. If everything goes as planned (and we get a vaccine soon), I expect a big rise in Bitcoin and Altcoins too.
The problem is the big wildcard CoVid. The last time the stockmarket crashed in march, it took Bitcoin with down with it, because the traders needed instant liquidity. The even sold Gold and Silver. I really don't know how it turns out this time. We have to wait and observe the cases after the easing of the lockdown. Do we have to lockdown again in a few weeks if cases arise again? And what's to expect of quarter 2 earnings in July? They will be worse than ever seen, that is clear. We have an ongoing recession already and then the damage in economy by the lockdown is just not calculable. We never had such a situation. The biggest problem out there is not solved. That's why I am cautious.
Good points, I agree. I think that every day that goes by we get closer to a treatment and or cure though, so I do think that another leg down in the markets will be short lived and likely needs to happen sooner rather than later if it is going to happen at all.
Hopefully!! This would relieve us all so much :)
according to this S2F Model we are also right on track.
30,000$ by the end of 2020. But if we see another stock market crash and BTC stays immune to this, we could price movements accelerating imho.
Last time it went down during the "stockmarketcrash" as quickly as normal assets because of liquidity problems. Even assets like gold and silver went down pretty hard these days. Hope it will be different in the next downswing and ceyptocurrency can decouple!
And the downspirale in stocks will come, maybe at Earnings for Q2 in July. These will be miserable, like we have never seen before. Or when CoVid starts to spread again and anpther lockdown is "necessary"....
Don't get me wrong, I am really bullish on Cryptos, but this virus and the shutdown of economy(!!) are a big, big wildcard
it is definitely a big wildcard and almost all governments worldwide misuse it
Pretty amazing how accurate this thing has been. The big tell will be end of 2021 and if bitcoin ever got near $100k or not.
and how much a unit of bread will cost by then...
Likely more than it does right now, which underscores why you can't be holding fiat in the near future.
there is a German company that actually fixed one of their bread products to 22.316 Satoshis - still many now the horrors of the hyperinflation era.
That is pretty interesting. I hadn't heard that. We need a lot more things priced in satoshis going forward...
@jrconel thanks for your post, I have been following your blog because I have keen interest in the Bitcoin halving as this will be my first time of experiencing it. I am waiting to see the aftermath effect on btc price.
I think it will be overwhelmingly positive in the medium to longer term. The short term might see a dip though.
Thanks for the response.I appreciate
I was just about to do some research on this, and this was a great way to start! Thank you!
As per the previous History, it seems that Bitcoin will again go up at the end of 2020. It is my own prediction. Maybe I am wrong.
Nope, that would jive with previous history.
very informative post, keep up the good work
Thanks.
you are welcome
"Priced in" most likely.
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