Euphoria slowly creeping in
You know the drill – friends and family suddenly popping up, asking if it’s time to dive into Bitcoin again. It’s that familiar signal that Bitcoin’s price is climbing.
I get it, but hear me out.
If you’re eyeing a hefty Bitcoin purchase right now, you might want to hold off a bit – even with the promise of spot Bitcoin ETFs possibly hitting the market soon (potentially as early as January).
Why the hesitation? Let’s take a peek at Bitcoin’s track record leading up to the last two Bitcoin halvings. (Next one’s due in late-April, around block 840,000.)
Trends from past Bitcoin Cycles
Bitcoin halving cycles clock in at about four years (210,000 blocks at roughly 10 minutes per block). At the beginning of each cycle, the block reward Bitcoin miners get is sliced in half, causing a jolt to Bitcoin’s supply.
Historically, Bitcoin’s price skyrockets over the following year and a half post-halving, then dips and levels out for the rest of the cycle.
1st Halving: From late-2013 to mid-2016, around the second halving, Bitcoin’s price plunged from $1,166 to $156. It bounced back to $780 (67% of its previous high) before sliding 40% to $472 in August 2016. The $472 marked a low point just a month post the second halving.
2nd Halving: Then, from late 2017 to late 2018, Bitcoin’s price tumbled from $19,666 to $3,150 before rebounding to $13,882 (70% of its prior peak). By March 2020, it had dropped 72% to $3,867. $3,867 was a bottom two months pre the third Bitcoin halving in May 2020.
3rd Halving: Now, we’re wrapping up another two-and-a-half-year run leading to the fourth halving in April 2024. This stretch started in late 2021, with Bitcoin’s price nosediving from $69,000 to $15,522 before bouncing back to $44,759 (65% of its previous peak).
This 65% bump, where we’re at now, echoes the 67% and 70% rebounds from past cycles. So, the big question looms: Will Bitcoin’s price retreat significantly like before the upcoming halving, as it did before?
If Bitcoin’s price fell 40% from here – similar to 2015-2016 – we’d be looking at $26,855. (Currently inching towards $44,000). If it dipped 72% – akin to 2019-2020 we’d land at $12,532. Surprisingly, not many folks are talking about these numbers amidst the current Bitcoin frenzy.
Will this time be different? Aren’t we all just waiting for billions to flood into Bitcoin right after the spot Bitcoin ETF gets the green light? Maybe.
The Spot Bitcoin ETF Saga
No crystal ball can tell if the market’s priced in the approval of a spot Bitcoin ETF yet. Some think it has and predict a “buy the rumor, sell the news” situation – where Bitcoin’s price spikes pre-ETF but dips post-launch.
Others suggest it’s a “buy the rumor, buy the news” deal – where Bitcoin’s price surges on both the rumor and the news.
Truth is, no one knows how the market will react once a spot Bitcoin ETF is good to go.
However, many aren’t asking: What if the spot Bitcoin ETF doesn’t get approved? This could trigger a significant Bitcoin price drop. Maybe not as drastic as before, but it’ll be noticeable. Also, what if Bitcoin hits a rough patch?
Bitcoin Investment Strategy for This Cycle
Feel free to HODL onto your BTC and DCA (dollar-cost average) your way into the asset – these strategies have paid off for BTC holders of over four years. But maybe hold off on going all in at these levels – especially with leverage. If we do see a hefty Bitcoin price drop, having some cash on the sidelines would be handy for scooping up cheap Bitcoin – rather than being broke and Bitcoin-less from overdoing it.
No one knows where Bitcoin’s headed from here. Maybe it’ll keep going up, up, up till and after the halving. But if history repeats itself and Bitcoin behaves like it did before past halvings, we might be looking at a much lower Bitcoin price come April 2024.
