The Bitcoin halving. It’s all anyone in the world of crypto has been able to talk about for the past few months. It is undoubtedly the most anticipated crypto event of 2020, and many believe it will be the catalyst to shoot Bitcoin past previous all-time highs. But what exactly is the halving and what can we realistically expect to come of it?
One of the near artistic qualities of the Bitcoin network and protocol (the rules that are built into the software), is that the supply of Bitcoin and how new coins are introduced into the network is transparent and hard coded, meaning they cannot be changed. That’s exactly how we know that only 21 000 000 BTC will ever be created, as it is in this set of rules. Every 10 minutes/1 block, miners on the network get paid a set amount of bitcoin for their work in upkeeping and securing the network. This reward is halved every 210 000 blocks (+- 4 years).
The Bitcoin block reward started out at 50 BTC and there have been two halving’s since then, the first on November 28 2012 where the block reward was reduced to 25 BTC, and the second on July 9 2016 where that reward was halved to the current block reward of 12,5 BTC. The next halving event is expected in May 2020 and will reduce the current block reward from 12,5 BTC to 6,25 BTC. So, what could this mean for the price of Bitcoin, and by extension the entire crypto market? To answer that we’ll have to take a look back at what happened before and after the previous two Halving’s mentioned above.
The first ever Bitcoin halving occurred on the 28th of November 2012. The price bottomed 378 days before this halving at $2.01 and subsequently rallied over 600% to a $15,51 high just before the halving itself. After the halving however, Bitcoin rallied over 3000% to a high of $279,94, just 133 days after the halving. This was a more than 13 000 % rally from the pre-halving bottom of $2,01 to the post halving high of $279,94.
Bitcoin’s second halving took place in July of 2016. Analyzing the trend surrounding this period reveals that the price bottomed here at $164, about 500 days before the halving event, and subsequently rallied over 380% to a $630 high just before the second halving. This was a more than 12 000% rally from the pre-halving bottom of $164 to the post halving top of $20 000. The top we are all too familiar with.
That was heavy load of data to take in, so the key takeaways are:
- Bitcoin tends to bottom between a year and a year and a half before the halving
- It rallies 380% – 600% in the buildup to the halving
- The majority of growth occurs many months after, and not before, the halving event
- Bitcoin rallies between 12 000% – 13 000% from its pre-halving bottom to post halving top
- The new high occurs between 130- 500 days after the halving
- Bitcoin has always broken previous all-time highs after every halving event
Now for the exciting part! Based on this what can we expect for the upcoming Bitcoin halving in May 2020?
Looking at recent price action, our pre-halving bottom would be around $3100, from the middle of December 2018. We have already rallied about 280% to $8600 since then, which seems consistent with previous halving’s behavior. Based on this we should see a pre-halving high between $11 000 and $18 000 occur sometime before May this year.
If Bitcoin follows previous halvings’, we can expect a new all-time high between 5 and 18 months after the halving in May takes place, which puts the estimated date between November of 2020 and December of 2021.
Based on the previous growth of between 12 000%-13 000% from pre-halving bottom to post halving top, a similar growth pattern could mean a new all-time high of between $370 000 and $410 000 per Bitcoin!
Please remember this is not investment advice and all figures provided are purely for educational and informational purposes. Historical performance is not a guaranteed indicator for future outcomes.
Brenton Naicker is the co-founder of Chainlink Capital, a crypto asset and blockchain technology consultancy company.
By Brenton Naicker