While Bitcoin (BTC +0.37%) is up more than 60% for the year, it is still having trouble breaking through the $30,000 mark. Over the past 30 days, Bitcoin is actually down 9%, and some investors now are warning that Bitcoin might fall even more before the year is over.
But longtime crypto investors are undeterred -- they are already looking ahead to the next Bitcoin halving event in April 2024. In the past, halving events sent the price of Bitcoin soaring, and they are fully expecting a similar outcome this time around. But is it possible that this catalyst, which slows the growth in Bitcoin's rate of new supply, might not pan out as expected?
Bitcoin halving history
If past results were a guarantee of future performance, then Bitcoin should be headed to the moon sometime in 2024. There have been three previous Bitcoin halvings (in 2012, 2016, and 2020), and each one has corresponded to huge price appreciation both before and after the halving. So, just about any mathematical model using these data inputs is going to tell you that the same thing is going to happen in 2024.
For example, hedge fund Pantera Capital just reiterated a $148,000 price target for Bitcoin based on its analysis of past halving events. Pantera Capital calculated that Bitcoin typically reaches a bottom 477 days before each halving event, increases in price leading up to each halving, and then goes into orbit after the halving. Typically, it takes Bitcoin 480 days from the halving to reach its next peak during a bull market rally. Using this model, Pantera Capital now expects Bitcoin to rise to $35,000 before April 2024 before soaring to $148,000 by July 2025.
CRYPTO: BTC
Key Data Points
And as if right on cue, things seem to be shaping up exactly as this model predicts. At the end of 2022, Bitcoin was trading near $16,500 in a bear market. Do the math, and this is almost exactly 477 days until the next halving. And it seems entirely within possibility for Bitcoin to increase in price by another 30% to hit the $35,000 mark by April 2024. But the big question is what happens after. Is Bitcoin really going to soar to $148,000?
Can we trust past performance?
From a purely mathematical perspective, one would expect the impact of each Bitcoin halving to become less pronounced over time. In 2012, for example, only 10.5 million Bitcoins were in circulation, so any change to the Bitcoin supply growth was going to have a very dramatic impact. Flash forward to 2024, and there will be 19.7 million Bitcoins in circulation. This is an important consideration, given that the total lifetime supply of Bitcoin is mathematically capped at 21 million. Put another way, by the time of the next halving, about 94% of all Bitcoin that can ever exist will have already been mined. With every new halving, the supply shock is getting smaller.
Image source: Getty Images.
If you use a 150-day window instead of the longer 480-day window used by Pantera Capital, it's possible to see how the impact of the Bitcoin halving has diminished over time. In 2012, Bitcoin increased in price from $12.35 to $127, a nearly 10-fold gain. In 2016, Bitcoin increased in price from $650.53 to $758.81, a 17% bump in price. And in 2020, Bitcoin increased in price from $8,821.42 to $10,943, a rise of 24%.
What's different this time around?
Back in 2012, Bitcoin was so new, and crypto was so unknown that one could argue that the first Bitcoin halving caught everyone by surprise. The markets were not as efficient back then, and the result was a huge price gain for Bitcoin. But in 2024, it's going to be very hard to "surprise" the market, especially given the recent entrance of new institutional investors into the crypto market. Everyone knows the Bitcoin halving is coming, and they even know the date when it will occur. So, some of the Bitcoin halving impact may already be priced in before the event actually occurs.
If you only look at the past two Bitcoin halvings and use a more conservative time window, a more reasonable expectation might be a 20% increase in price in 2024. That's a respectable return but not enough to launch Bitcoin into orbit. If Bitcoin is indeed trading at $35,000 by April 2024, that would send Bitcoin past the $40,000 mark by the end of the year. Again, that's nice, but it's still well under Bitcoin's all-time high of $68,789.63. And it's nowhere near the $100,000-plus level some investors predict.
Bullish on Bitcoin
That said, I'm bullish on Bitcoin both over the short term and the long term. But I'm not trying to time the market, and I'm not trying to analyze past trading charts to spot patterns in the data. Instead, I'm looking at Bitcoin from a purely demand perspective. There is demand for a crypto asset such as Bitcoin, and that demand will grow over time. As it does, so too will Bitcoin's price.
