Readers have been asking me for an update on the recent Bitcoin halving.
I’ll share my thoughts on that today. Plus, I’ll show you why Bitcoin has much more upside ahead.
But first, let me give you a refresher on what the Bitcoin halving is.
Deflationary by Design
Bitcoin’s founder, Satoshi Nakamoto, designed Bitcoin to be a deflationary asset.
That’s why there is only a finite number of Bitcoin. The supply of new Bitcoin awarded to Bitcoin miners halves every 210,000 blocks or four years.
When Bitcoin is halved, the number of new Bitcoin that can be created (or mined) is cut in half.
That’s why halvings make Bitcoin mathematically scarcer. Think of it as more competition for fewer available Bitcoin.
The halving process will continue until all 21 million coins are mined (around the year 2140).
This scarcity, combined with increases in demand patterns following halving events, puts upward pressure on prices over time.
That doesn’t mean Bitcoin isn’t volatile. But over time, its inherent scarcity and increased acceptance has pushed it above short-term price drops.
How Halvings Affect Bitcoin’s Price
Historically, the price of Bitcoin has risen for six months after halving days before leveling off or hitting some bumps.
Following the halving dates in 2012, 2016, and 2020, the peak price of Bitcoin leapt by 93x, 30x, and 8x respectively.
The chart below shows these past halving dates (red lines) and Bitcoin’s following price increases (blue line)…
Let’s break down each of these periods.
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Pre-Halving Period: January 9, 2009 to November 28, 2012.
The initial block reward was 50 Bitcoin per block of Bitcoin mined. That meant for every block a miner added to the chain, they earned and created 50 Bitcoin.
This initial period had a critical impact on prices since it reduced the remaining Bitcoin most dramatically.
In late 2010, with the emergence of early exchanges, the price hit above $1 and spiked to $10 by 2012. A crash followed, but recovery was quick.
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1st Halving Period: November 28, 2012 to July 9, 2016.
The block reward cut to 25 Bitcoin. By the end of this period, 75% of the total Bitcoin supply had been issued or mined.
That decreased the remaining supply, leading to a higher Bitcoin price. That in turn led to growing public awareness.
Bitcoin’s price rose from $12.50 on the November halving date to peak at $1,162 in November 2013.
There was an extended decline, caused by the failure of Mt. Gox, a leading exchange.
Despite this, Bitcoin’s price held above the prior period’s peak. That was another long-term bullish sign.
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2nd Halving Period: July 9, 2016 to May 11, 2020.
Again, the block reward halved to 12.5 Bitcoin per block mined.
This period saw the rise of Ethereum, another popular cryptocurrency. As well as the creation of thousands of smaller cryptos, or “altcoins.”
The Federal Reserve kept rates low and eventually cut them back to zero percent when Covid-19 hit.
Still, Bitcoin rose from $638 on the July 9 halving date to a peak of $19,400 in December 2017.
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3rd Halving Period: May 11, 2020 to April 19, 2024.
Once again, the block reward cut to 6.25 Bitcoin.
Bitcoin’s value shot up as the world faced economic challenges from the pandemic.
Bitcoin hit new highs and earned the nickname “digital gold” for being a reliable asset during chaotic times.
Plus, as we’ve written, we saw the introduction of Bitcoin exchange traded funds (ETFs). These provided more channels for people to access Bitcoin through regular brokerage accounts.
Bitcoin’s price rose from $8,475 on May 11, 2020 to peak at $73,628 in April 2024, right before the halving date.
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4th Halving Period: April 20, 2024 to April 2028 (estimated).
The block reward cut to 3.125 Bitcoin.
More media attention on this halving reinforced the notion of Bitcoin’s scarcity and its appeal as a digital store of value.
Bitcoin’s price has more than doubled over the past 12 months. At our Distortion Report advisory, we recommended it at $27K last May. It’s now above $69K.
But I believe Bitcoin could hit $100,000 this year and $150,000 next year.
The history of price appreciation following halvings is one primary guide. Plus, the Fed will eventually cut rates.
As I’ve written, it has already pivoted to a more accommodative policy. Despite lingering inflation, the Fed slowed the pace of quantitative tightening (QT).
QT is when the Fed reduces its book of assets. The opposite of QT is quantitative easing (QE). When easing has happened historically, it has led to higher Bitcoin prices.
Take Advantage of This Post-Halving Period
I believe everyone should own at least a little bit of Bitcoin as a speculative asset. Whether that’s buying it directly or through a spot ETF.
And, despite the big runup over the past year, you can still take advantage of this post-halving period.
Your best strategy is to “leg” or average into Bitcoin. For instance, say you have $1,000 to invest in Bitcoin. Then, perhaps invest $100 every month.
That way, you can profit from the overall uptrend while buying at lower prices if volatility increases along the way.
Regards,
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Nomi Prins
Editor, Inside Wall Street with Nomi Prins