In today’s Crypto Traders Guide, we look into what is the Bitcoin Halving, and compare Bitcoin’s price performance during the last two halving events with today.
A Historical View of Bitcoin Prices
“Just like any world-changing market or technology, Bitcoin has gone through several crash and boom cycles in its history. It’s the normal process of “price discovery”, or finding the fair market value of a new asset.”
– Chris Dunn
Here’s a little history lesson about Bitcoin’s price since inception. Bitcoin has been through several price bubbles, characterized by exuberant buying into a parabolic price structure, and eventually correcting back down quickly and crashing over 80% from the peak over a short period of time.
Over the last 12 years since Bitcoin was created, it has gone through 3 notable bubbles, first when it climbed from under $0.01 in early 2010 to $32 in July 2011 before the bubble burst, sending price on a downtrend for 5 months and hit a low of $2 in November 2011. Our second bubble came in 2013 with the first leg coinciding with the Cyprus bailout incident, where we saw prices break above the previous high of $32 to about $260 in April 2013, followed by a second leg that peaked at $1,200 in November 2013, before crashing all the way down to around $160 in January 2015.
Finally, the most recent bubble saw Bitcoin peak at $20,000 in December 2017, before dropping 84% over the next 12 months and bottoming out at $3,150. This low came in December 2018, and prices consolidated within the $3,000-4,000 range for 3 months, before rallying to $14,000 in the following 3 months. We then saw it fall back down to $6,400 over 6 months, before rallying to $10,500, and a big dip in March 2020 to $3,600 before climbing back up to over $7,000 today.
With the Bitcoin Halving just one month away, will this time be different?
What is the Bitcoin Halving?
Based on the Bitcoin algorithm that determines its fixed money supply and schedule of distribution, the amount of coins that are added into the network halves approximately every 4 years, or more accurately, every 210,000 blocks with each block estimated to take 10 minutes.
Bitcoin turns 12 years old in 2020, and the next supply halving is estimated to happen on 13th May 2020 (source: http://bitcoinclock.com/).
Bitcoin Prices Around the Halving
It is always a debate on what Bitcoin will do in terms of pricing for a halving event. Some people believe that the halving is already priced in by the market and thus there’s no expectation for the price to do anything. Others believe that due to price equilibrium, a halving of supply should cause an increase in price if demand for Bitcoins is equal or greater than what it was before the halving event. Below is a chart showing past price performance of the last two halving events compared with the upcoming one:
By most measures, we are currently in a macro Bull cycle for cryptocurrencies as a whole, especially if the $3,600 low of March 2020 holds up as a higher low after the $3,150 low of December 2018.
Will there be a 4th Bitcoin Bubble, bringing prices back above $20,000 and beyond? And could it happen in 2020-2022? How high will we go this time?
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