It has now been nearly five months since the Bitcoin (BTC +1.56%) halving took place in mid-April, and it's fair to say that things have not turned out as planned. Wasn't Bitcoin supposed to skyrocket in price after the halving -- when the reward for mining new coin is cut in half -- and hit a new all-time high? Alas, Bitcoin has instead drifted lower, and is now trading near $57,000, which is 10% below where it was in April.
So where does Bitcoin go from here? Here are three potential scenarios for Bitcoin in the current halving cycle, which is now projected to end in March 2028.
Historical scenario
If you believe that history repeats (or at least rhymes, as Mark Twain said), then it's likely that Bitcoin will follow much the same pattern as it did in its three previous halving cycles in 2012, 2016, and 2020. Based on the historical evidence, Bitcoin follows a very defined pattern in each halving cycle, which Wall Street investment bank Morgan Stanley (MS +0.91%) refers to as "the four seasons of cryptocurrency."
CRYPTO: BTC
Key Data Points
The cycle starts with a gradual ascent, followed by a very sharp rise as Bitcoin searches out a new all-time high. As investors pile into Bitcoin and the media joins the crypto bandwagon, it leads to intense froth and speculation, followed by an inevitable collapse in value. The end of the cycle is a crypto winter that can last as long as 12 months. But then the next halving takes place, and the cycle starts anew.
Thus, in this scenario, we can expect that Bitcoin will rally for 12 to 18 months after the halving, as it soars to a new all-time high. Given that the halving took place in April, this means that Bitcoin should reach a new all-time high by the end of 2025. For example, investment firm Bernstein thinks Bitcoin could hit $200,000 in 2025.
But from there, Bitcoin will likely experience extreme volatility, as it attempts to push even higher. At some point, the price of Bitcoin could collapse -- just as it did in 2022 -- as investors sell their holdings and lock in profits.
Cathie Wood of Ark Invest has crunched the data and concluded that Bitcoin is particularly prone to sustained declines of 77% or more. So if Bitcoin manages to hit a new high of $200,000 by the end of 2025 and doesn't go any higher, we could be looking at a Bitcoin price of just $40,000 heading into 2028. But then Bitcoin will begin to rally again as the next halving cycle approaches, and analysts will once again be predicting new all-time highs for Bitcoin.
Best-case scenario
In a best-case scenario, Bitcoin will lose some of its volatility, and become much more predictable in terms of future price performance. Instead of wild swings and gyrations, there is a steady march to a new all-time high.
This might sound unlikely, given Bitcoin's historical track record as a volatile asset, but consider all the money pouring into Bitcoin via the new spot Bitcoin exchange-traded funds (ETFs). The thinking here is that inflows into these new ETFs will help to prop up the price of Bitcoin, and absorb any selling pressure. At the same time, more buy-and-hold institutional investors will enter the crypto market, and they will be less likely to attempt to profit from short-term price swings.
Image source: Getty Images.
If you are hoping that Bitcoin will eventually reach $1 million by the year 2030 -- which is what some analysts are now predicting -- then Bitcoin needs to generate annualized returns of 75% or more. This is the figure that Cathie Wood used in her original projection of a $1.48 million price for Bitcoin. In short, Bitcoin needs to soar 75% every year between now and 2028, and only then will there be a path to $1 million for Bitcoin by the time of the next halving.
Given that Bitcoin generated annualized returns of 230% in the 10-year period between 2011 and 2021, and turned in 150% returns last year, 75% may not be as heroic an assumption as it first seems. However, Bitcoin is only up 31% year to date, so it will require a huge year-end rally to get us there in 2024.
Worst-case scenario
The ultimate worst-case scenario, of course, is that Bitcoin goes to zero. Some investors are still convinced that Bitcoin is nothing more than a speculative bubble, and that it offers no intrinsic value. At some point, even longtime Bitcoin bulls might decide to dump their holdings, and that could lead to a long, tragic decline in price as we head into the next halving cycle in 2028.
While I don't personally subscribe to this view, there is certainly a fair amount of political and regulatory risk. While some politicians are pro-crypto and are trying to establish a regulatory framework where Bitcoin can flourish, there are many more politicians who are anti-crypto, and still view Bitcoin as something that's only good for money laundering and evading international sanctions.
Buy Bitcoin for the long haul
Trying to time Bitcoin's market moves is a fool's errand. Instead of buying low and selling high, you will likely end up buying high and selling low.
A much better strategy is simply to buy and hold Bitcoin for the long haul. By the time the next halving rolls around in 2028, you might be pleasantly surprised by just how much Bitcoin has appreciated in value.
