The Halving Effect: What the Data Tells Us About the Next Bull Run
Bitcoin halving, also known as the halvening, is an event that occurs every four years in the Bitcoin network. It is an important part of Bitcoin’s monetary policy that is designed to control its supply and inflation rate. In this article, we will explore what Bitcoin halving is, how it affects the price of Bitcoin, what we can expect from the next halving, and other important details related to this event.
In simple terms, Bitcoin halving is the reduction of the block reward that miners receive for adding a new block to the blockchain. The block reward is the incentive that miners receive for solving complex mathematical equations that validate transactions and add them to the blockchain. The block reward is a fixed amount of Bitcoin that is currently set at 6.25 BTC per block. However, every four years, the block reward is halved, which means that miners will receive 3.125 BTC per block.
- The first halving occurred in 2012, reducing the block reward from 50 BTC to 25 BTC.
- The second halving occurred in 2016, reducing the block reward from 25 BTC to 12.5 BTC.
- The third halving occurred in May 2020, reducing the block reward from 12.5 BTC to 6.25 BTC.
- The next halving is expected to occur in 2024, reducing the block reward from 6.25 BTC to 3.125 BTC.
How Does This Affect Price Action?
Bitcoin halving has a significant impact on the price of Bitcoin. This is because the reduced block reward means that the supply of new Bitcoin entering the market is decreased. When the supply of Bitcoin is reduced, and demand remains constant or increases, the price of Bitcoin tends to go up. This is because the market perceives Bitcoin as a scarce asset, and as the supply decreases, it becomes more valuable.
The two previous halvings have resulted in a significant increase in the price of Bitcoin. In 2012, the price of Bitcoin was around $12 before the halving, and it surged to around $1000 in 2013. In 2016, the price of Bitcoin was around $650 before the halving, and it surged to around $20,000 in late 2017. The 2020 halving also led to a price increase, with Bitcoin’s price surging to over $60,000 in April 2021.
Bitcoin halving is an important event in Bitcoin’s monetary policy, and it highlights the difference between Bitcoin and traditional currencies. While traditional currencies can be printed in unlimited quantities, Bitcoin has a fixed supply, which is controlled by its protocol. This makes Bitcoin a deflationary currency, meaning that its value tends to increase over time.
Bitcoin halving also emphasizes the importance of miners in the Bitcoin network. Miners play a crucial role in validating transactions and securing the network, and they are rewarded with new Bitcoin for their efforts.
What Can We Expect from the Next Halving?
The next halving is expected to occur in 2024, and it is difficult to predict exactly how it will impact the price of Bitcoin. However, based on previous halvings, we can expect to see a price increase in the months leading up to the event. There may also be some short-term volatility in the price of Bitcoin after the halving, as miners adjust to the reduced block reward.
In my journey of understanding how the halving can affect the Bitcoin price, I started to look for correlations, and patterns that have been mimicking previous cycles. Here’s what I have found:
Based on historical price data, the three Bitcoin halvings have resulted in significant price increases followed by a drop in price. Each cycle, the percentage of the price increase has decreased while the percentage of the price drop has also decreased. For example,
In the first halving, we saw an increase of 24,000%, which was followed by an 86% drop in price.
The second halving resulted in a 3100% increase in price, followed by an 84% decline.
The third halving saw a price increase of 691%, followed by a 78% drop. This is the current cycle we are in.
Based on this pattern, we can make a few observations. Firstly, the percentage of the drop in price decreases in each cycle. Secondly, the percentage of the increase in price also decreases and is cut off by 8, then 4, and so on.
For instance, dividing the 24,000% increase by 8 results in 3,000%. Dividing this number by 4 gives us 750%. Interestingly, the first halving had a price increase of 24,000%, followed by 3,100% in the second halving and 700% in the third. Therefore, dividing 750 by 2 gives us a theoretical rise of 375% for the next halving.
To estimate the price of BTC on the day of the next halving, we can use historical patterns. After the first halving, BTC increased by 320% from the bottom to the next halving day. After the second halving, BTC increased by 180% from the bottom to the day of the next halving. Based on these metrics, we can predict that BTC could increase by 80–100% after the bottom following the third halving. If we calculate from this cycle’s bottom of $15,479 to the next halving day in April, BTC could be around $30,000.
Now, let’s add the 375% increase to that. $30,000 multiplied by 375% equals $112,500, which could be the top price for BTC. It’s essential to note that this is purely speculative, and other factors such as market demand, regulatory developments, and global economic conditions also play a crucial role in determining Bitcoin’s price.
Conclusion
In conclusion, while the Bitcoin halving event is a crucial component of the cryptocurrency’s design, it is not the only factor that determines its price. Other variables such as market demand, regulatory developments, and global economic conditions also play a vital role in shaping Bitcoin’s value. However, by examining past trends and data, we can make educated predictions about the possible outcomes of the next halving cycle.
While it is impossible to predict with certainty what the future holds for Bitcoin, we can expect to see price increases leading up to the next halving, followed by short-term volatility in the market. With the right research and understanding, investors can position themselves to benefit from these fluctuations and capitalize on the opportunities presented by the cryptocurrency market.
It’s also important to approach investing in Bitcoin with caution and to do your own research before making any investment decisions.
You can find additional insights based on the charts in my YouTube video. Follow the link below to watch it:
https://www.youtube.com/watch?v=YYFoYycQHp0&t=220s
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