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February 11, 2021

Is Bitcoin Following the Growth Range Defined by Previous Halvings?

February 11, 2021

When Bitcoin is in the realm of price discovery, as it is now, estimating where the price will move in the future is no easy task, but some believe that analyzing the price following “halving events” can give an indication. 

When analyzing the Bitcoin price it is extremely easy to become worried over every little market movement. When the price is sitting at $40,000 if those daily swings of plus or minus 10% are a $4000 swing in your portfolio value, that’s enough to make anyone sweat.

But sometimes it’s best to take a large step backward and remember the bigger picture.

Since its inception, the bitcoin price has moved in eerily similar growth cycles, with the start of each cycle triggered by a “halving event”. Halving events have therefore become a key factor for anyone trying to predict future prices.

What is a halving event?

For those that are not aware, a halving event is when the amount of Bitcoin entering circulation every 10 minutes drops by a half. This event is built into the Bitcoin algorithm and cannot be altered. Each halving event takes place around every four years.

When this happens, overnight the amount of bitcoin entering the market shrinks. But whilst the supply shrinks, the demand usually remains the same, which normally leads to an increase in price. At least, that is what has always happened following previous halving events.

There have been three halvings during Bitcoin’s lifetime. One in 2012, one in 2016, and the last one, which occurred in May 2020. After the halvings in 2012, and 2016, prices of Bitcoin steadily increased until a new all-time high was reached. Therefore, when the halving of May 2020 rolled around, everyone held the same level of anticipation.

Well, in May 2020 Bitcoin price was $9000. Fast forward to February 2021 and Bitcoin price has surpassed $40,000. The notion of Bitcoin prices steadily increasing after a halving event has certainly held true so far.

But how can anyone predict where the end of the current growth phase might be?

A window into the future

The price action movements from the previous two halving cycles, in 2012 and 2016, are often used by the crypto community to attempt to predict future market movements of Bitcoin.

Bitcoin after 3rd halving chart

Bitcoin price movement (orange) depicted within the predicted growth range from previous halving cycles (blue). Source: Ecoinometrics analysis of Coinmarketcap data.

In the example above, the average growth and the growth range, from the two previous cycles are calculated and superimposed in front of the current price. This provides a potential ‘window into the future’ for where the bitcoin price may climb to.

More upside this time around?

The remarkable and truly exciting inference from graphs such as these is that, based upon previous growth cycles, there could be far more upside still to come for the king of cryptocurrencies.

Based upon historical cycles, Bitcoin prices may reach all-time high levels well above $300,000, with any subsequent bear markets failing to bring prices back down to current market levels.

Although exciting, we have to keep one leg firmly in reality. These exciting predictions haven’t happened yet and may never happen.

But with corporations such as Tesla now investing heavily in Bitcoin, you can certainly begin to see how it may reach targets such as those.

Remember, no one truly knows where Bitcoin prices will go, but this method is likely one of the best tools currently available, and the current similarities with previous price cycles, while no indication of future prices, is hard to ignore.

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