In just 13 years, Bitcoin (BTC -1.41%) went from trading for just a few pennies to nearly $69,000 at the peak. Even though the world's original cryptocurrency is only worth about $21,000 today, many are optimistic that Bitcoin will rebound.
These hopeful price predictions use varying methods and different reasoning for their estimates. For this evaluation of Bitcoin's future price, we will focus on the patterns between halving events and use the year 2024 as the deadline, since that is when the next Bitcoin halving should occur.
Halving events are what helps make Bitcoin so unique. Bitcoin's code is programmed to ensure that the growth in supply falls with time. Since Bitcoin's code is open source, we can do a little math and find out that Bitcoin's block reward is cut in half every 210,000 blocks -- or roughly every four years.
The halving events serve as an easy marker to track the progression of Bitcoin's price. Bitcoin analysts refer to the time between each halving as a cycle.
Bitcoin's first halving was in November 2012 and dropped the block reward from 50 Bitcoins to 25. The second was in the summer of 2016. And the most recent was in May 2020, resulting in the reward being cut from 12.5 to 6.25 Bitcoins.
A little data exploration never hurt
When looking at the data between halvings, a few things become evident. First, the price at each halving is roughly 55% less than the all-time high from the previous cycle.
Before Bitcoin's first halving, the price topped out near $34 in June 2011. By the time of the November 2012 halving, Bitcoin was worth just about $12 -- a drop of just over 60%. At the 2016 halving, Bitcoin was worth around $650. This was about a 45% decrease from Bitcoin's previous all-time high of around $1,200 in November 2013.
A similar situation occurred at the halving in May 2020. Back then, Bitcoin was worth about $8,800 -- nearly 65% less than the December 2017 all-time high. When averaging those decreases, we discover that on average, Bitcoin's price is about 55% less than the previous all-time high when the halving occurs.
The next halving is set to take place about May 2024. Simple math can help us arrive at a possible price that Bitcoin will reach by then. In the current cycle Bitcoin peaked at almost $69,000 in November 2021 -- based on past behavior, Bitcoin's price should be about 55% less than that. This implies a price of about $30,000 if past patterns continue at the time of the next halving.
Another insight we can gather from data is that the amount Bitcoin increases in between each halving diminishes from the previous cycle.
Bitcoin was trading at about $11 at the time of the first halving in November 2012. It then peaked in December 2013 to about $1,100 -- an increase of almost 10,000%. From the next halving in July 2016, Bitcoin's price rose from around $650 to a new high in December 2017 of just under $20,000 -- almost a 3,000% gain. From the most recent halving in May 2020, when it was trading for about $9,000 to the all-time high of just under $69,000 in November 2021, Bitcoin increased about 670%.
It becomes further evident that Bitcoin's returns diminish with each halving cycle that passes. But how much will the price increase after the next halving?
On average, Bitcoin returns about 25% less with each new cycle. Subtracting a quarter from the previous 670% return, we arrive at about a 500% increase. A gain of this size from our speculative $30,000 price in May 2024 price would imply a new all-time high of almost $150,000.
The bigger picture
We could speculate on Bitcoin's price until the last Bitcoin is mined sometime after 2100. Regardless of what the actual price becomes, there is one clear trend that has held true: Those who hold Bitcoin longer are rewarded with better returns as each halving passes.
Investors who bought Bitcoin after the May 2020 halving likely haven't seen great returns. To maximize potential returns, the data show us that Bitcoin should be held for at least one halving. Although recent weakness in Bitcoin caused every portfolio to take a hit, current prices should be viewed as an opportunity to increase exposure before the next halving in May 2024.