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What's next for Bitcoin (BTC) now that halving has already taken place?



After weeks, months, or even years in advance, Bitcoin's halving is over. At approximately 3:21 pm EST, Bitcoin's mining reward was cut in half, dropping from 12.5 BTC for every transaction data block added to the network to 6.25 BTC; The number of BTCs produced each day fell from 1800 to 900.

Despite the massive news cycle surrounding the halving event, Bitcoin's price has managed to remain relatively stable in the past 24 hours.

However, with all the narrative buzz surrounding whether or not Bitcoin's price will rise as a result of halving, many wonder: what comes next?

BTC price movements immediately before and after halving are part of the course

For most of last week, BTC started a steady climb from $ 9,000 to around $ 9,600. On Sunday, the price of Bitcoin suddenly dropped from about $ 9,640 to around $ 8,750, where it remained more or less until the time of publication; At the time the halving occurred, there was a brief boost of approximately the $ 9,000 mark.

Jose Llisterri, co-founder and product manager at the Interdax cryptocurrency derivatives exchange, explained price movements this way:

"The bitcoin and halving price was a case of 'buy the rumor, sell the news', with the price rising in anticipation of the event as optimism among investors grew."

"However, just before halving, the price has dropped as the block reward has been cut in half," he said.

The "rumor" that Llisterri was also referring to is likely the narrative that Bitcoin's price will rise after halving. After the two halving’s that took place in the past, the price of Bitcoin has seen a considerable increase in the following 12-18 months; Analysts supporting this theory say this happens due to increasing BTC shortages.

Post-halving BTC price increase could take months (or years) to arrive, and when it does it may not stay

However, if the post-halving price increase comes eventually, it will probably be at least a year before it starts. Therefore, the "news" Llisterri is referring to is probably halving today: a significant event, certainly, but with consequences that will not be fully realized for months, even years.

It is also important to note that, historically, the price increase that Bitcoin experiences in the time after halving is not linear: in the past, the price of Bitcoin increased between 12 and 18 months after halving; after that point, the BTC price falls steadily for months before finally hitting bottom and finally recovering.

Coinmetrics logarithmic graph of Bitcoin price action after half, via Investopedia

However, the key seems to be at the bottom: the post-halving spikes in the 2017 price are impressive, but they certainly don't last; Some might even argue that, because of the damage they do to BTC's reputation (and the unwitting investors they inevitably burn), these spikes do more harm than good.

But after the spikes ended, after Bitcoin has spent months falling, falling and falling, the post-halving minimum price has been much higher than the pre-halving maximum price.

In the past, this cycle seems to have lasted two to three years: halving occurs, and then 12-18 months later, there is a massive price increase. After the peak passes, there is a price decrease that lasts another 12-18 months; then, in the remaining months before the next halving, an upward trend begins to form. The process then seems to repeat itself.

When will the post-halving price peak hit?

For example, Bitcoin's first halving, which occurred in November 2012, resulted in a rise from about $ 11 to a peak of almost $ 1,150, but took 12 months; the second figure was not reached until the end of November 2013. Even then, the height was short-lived; By mid-December, the price had plummeted to nearly $ 500.

In fact, the price continued falling throughout 2014 and in 2015; it bottomed around $ 200 in January 2015 (14 months later), and remained between $ 200 – $ 300 until the end of October of that year.

It was not until early November 2015 (24 months after the $ 1,150 peak and 36 months after halving) that Bitcoin was able to break above the $ 300 point; By the end of 2015, BTC had risen to $ 430.

The second halving occurred in July 2016. When the halving took place, Bitcoin was around $ 660; By the end of the year (5 months later), Bitcoin had reached $ 957 (a price that was not yet as high as the post-halving peak in 2013).

This time, it took around 17 months for the post-halving price spike to form, from July 2016 to July 2017, Bitcoin's price had nearly quadrupled from about $ 660 to $ 2,550. Then, in mid-December 2017, the price of Bitcoin peaked at around $ 20,000.

However, as in the previous halving, the peak was short-lived: As of December 31, the price of Bitcoin was $ 13,240.

And then, still according to what happened during the first halving, the price started a long, slow decline: Six months later, in June 2018, the price of Bitcoin had dropped to $ 7,650; It finally bottomed 12 months later, in December 2018, around $ 3,200.

(Still, it's important to note that despite this massive decline, Bitcoin's price still showed a significant increase from its pre-halving price points: as low as $ 3,200 compared to $ 20,000, it's still almost a 400% higher than Bitcoin price prior to mid-2016 of $ 660.)

Bitcoin remained in the $ 3,000 – $ 4,000 range until April 2019 (16 months after the peak), when the price started to recover: it briefly rose to almost $ 13,000 in early July 2019. Since then, Bitcoin has largely held steady. within the price range of $ 7,500 – $ 10,500, with a brief drop below $ 5,000 due to the economic consequences of the coronavirus.

How high will Bitcoin's next price spike be?

Of course, there are a myriad of factors that affect the price of Bitcoin after halving: scarcity is certainly one of them, but so are the number of users on the network, the rate of adoption of BTC in institutional settings, factors economic factors that exist outside the cryptosphere (i.e. the coronavirus and the government stimulus that followed).

However, if history were to repeat itself without restrictions, we are likely to see a post-halving price spike sometime between 18 and 24 months from yesterday (assuming the price spike takes progressively time to form each time a halving).

Also, we could expect a proportionally smaller price spike after halving.

This is because previous halving’s had progressively smaller price spikes (relative to the price at the time of halving); From November 2012 (BTC at $ 11) to November 2013 (BTC at $ 1,050), there was a price increase of 9400%. From July 2016 (BTC at $ 660) until December 2017 (BTC at $ 20,000), there was an increase of 2900%.

In other words, the percentage relationship between the price of Bitcoin at the time of the previous halvin's compared to the bitcoin price peak at halving can be reduced: the growth rate from the 2016 halvingd price to the price peak at 2017 halving was proportionally 3.24 times less than the growth rate from the 2012 halving price to the 2013 price spike.

Therefore, if this pattern continues uninterrupted by external factors, the growth rate from the price peak could continue to decrease progressively: if the same percentage decrease occurs between the 2020 halving price and the post-halving price peak, the next peak would be a 740% increase from the current price, or approximately $ 64,000.

Where will the new minimum be?

But enough about price spikes, what about minimum prices?

There are several analysts who believe that minimum BTC prices are ultimately set by miners who refuse to sell their BTC at a loss.

Jeremy Britton, the chief financial officer of Boston Trading Co., explained earlier this year that prior to yesterday's halving, it cost around $ 3,000 in electricity alone to mine a single bitcoin (despite the cost of hardware and internet access), Britton explained.

“So when BTC‘ crashed ’in early 2019, the price was not less than $ 3,000; the miners did not want to sell for a loss. "

Now, because the miners' profits have been cut in half, we can assume that it costs approximately $ 6,000 in electricity to mine a single Bitcoin. Therefore, if miners continue to refuse to sell their BTC at a loss, the new minimum price should theoretically be at least $ 6,000.

Add the biggest Bitcoin shortage on the market that is supposed to cause the halving, and the minimum price could even be hired: Jose Llisterri of Interdax recently told him that:

"In the long term, reducing daily bitcoin issuance from 1,800 to 900 BTC will gradually influence the market and in theory should drive prices higher in the long term."

Other factors are also at play, particularly in a post-coronavirus era:

"The contrast between the traditional monetary system and bitcoin's fixed supply program could also boost demand for the cryptocurrency."

As inflation within the Bitcoin system is now 1.80% over the next four years, which is below the mandates of most central banks and almost below the rate of gold inflation, this sets the stage for Bitcoin to make its mark, ”said Llisterri.

What do you think about the future of Bitcoin now that its third halving has taken place? Let us know in the comments on our Facebook and Twitter.


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