With the next Bitcoin (BTC) halving about a year and a half away, many investors are preparing strategies to help them accumulate and add to their positions in a zone of maximum profitability.
By using the previous halvings and price movements as a guide, we can better predict price levels, bounces, and movement patterns for the future. Other factors like difficulty adjustments for mining Bitcoin blocks further paints a clearer picture of what to expect as we creep closer to the 2020 halving.
Twitter user @100trillionUSD created a chart to better show some of these historical correlations and their effect on the price of Bitcoin.
— Plan₿ (@100trillionUSD) February 4, 2019
The Halves and Halve-Nots
A ‘Halving’ in cryptocurrency terms, occurs in order to decrease the reward amount by half for mining blocks on the blockchain. By simply decreasing the rate of supply, the value of the coins which are already on the market should theoretically increase. This pattern can be seen in the history of Bitcoin and other digital currencies, leading many wondering if next year will bring about the third iteration of the pattern.
At the time of writing, there have been two previous Bitcoin halvings, the first in Nov 2012, and the most recent in July 2016. The reward for mining a Bitcoin block is currently 12.5 BTC, which will be cut to 6.25 BTC after the next halving. Bitcoin halvings occur every 210,000 blocks, and the next estimated occurrence should happen in May of 2020 — nearly 15 months from now.
It is also important to point out that decreases in the difficulty of Bitcoin’s hashing algorithm, and tests of the 200-week moving average have both historically resulted in significant growth for Bitcoin. BTC tested the 200-week MA back in December proceeding a 25 percent difficulty decrease the month before.
Taking a look at the logarithmic weekly BraveNewCoin (BLX) Bitcoin Index chart can help to better estimate price fluctuations leading up to and after Bitcoin halvings.
In the 365 days that led up to the first two halvings, Bitcoin saw periods of fairly steady movement to the upside. Just the same, the halvings themselves were catalysts for periods of explosive growth in which prices skyrocketed. BTC grew nearly 9000 percent after the first halving and 3000 percent after the second. Considering a similar two-thirds decrease in growth, the next bull run could bring prices upwards of $150,000 for a single Bitcoin in the years following the next halving.
Investors looking to increase their holdings of Bitcoin will want to examine their strategies wisely in early 2019. At these levels, it might be most important to think about accumulation for value in the long-term. If history repeats itself, these next few months could be critical for achieving maximum profitability in the years to come.
Shake off any losses from 2018, recalibrate, and focus on how to make the best of the current market to ensure that you are prepared for the next period of growth. In this way, emotions will be less of a factor in making future investment decisions.
Do you think Bitcoin’s price will spike leading up to the next halving, as it has in the past? Have we yet reached the bottom? Let us know your thoughts in the comments below!
Images courtesy of Twitter, TradingView, Shutterstock.