Will Bitcoin Rise 16.1x?

view original post

In November 2012, the first bitcoin halving cycle was recorded, and the event reduced the reward for mining new Bitcoin blocks by half. Every four years or so 210,000 blocks are mined and the rate at which new bitcoin is mined is cut by 50%.

The supply limit and increased difficulty have been instrumental in the thesis that bitcoin’s price can only rise in time to offset the inflationary effects of fiat currency.

To get a sense of how high bitcoin could go during this fourth cycle, we look back at prior cycles, and invoke analysis from Social Capital to highlight the implied future prices.

Key Points

    • Bitcoin’s reward halves every four years, historically leading to significant price jumps.
    • Increases post-halving: first cycle (87x), second cycle (28x), third cycle (8x).
    • Implied prices for the fourth cycle over time are:
      • One month: $73,110.
      • Nine months: $238,000.
      • Eighteen months: $497,000, potentially averaging $1.14 million.

First Halving Cycle

  • One Month Post-Halving: Bitcoin’s price increased by 8%.
  • Three Months Post-Halving: The price surged by 145%.
  • Six Months Post-Halving: Bitcoin’s value rose by around 10x.
  • One Year Post-Halving: Bitcoin skyrocketed by 87 times its value on the halving date.
  • Eighteen Months Post-Halving: A pullback from the 12-month figure but it remained 45x higher.

Second Halving Cycle: June 9, 2016

  • One Month Post-Halving: Bitcoin gained 15%.
  • Three Months Post-Halving: The increase was a modest 6% versus the first cycle at the same time.
  • Six Months Post-Halving: Bitcoin increased by 34%.
  • Nine Months Post-Halving: Bitcoin more than doubled.
  • One Year Post-Halving: Bitcoin grew by nearly fivefold.
  • Eighteen Months Post-Halving: BTC increased by nearly 28 times from the halving date.

Third Halving Cycle: May 11, 2020

  • One Month Post-Halving: Bitcoin rose by 14%.
  • Three Months Post-Halving: The price was up 37%.
  • Six Months Post-Halving: Bitcoin climbed by 79%.
  • Nine Months Post-Halving: Bitcoin soared by 5.4x its halving date price.
  • One Year Post-Halving: Bitcoin grew 6.5x.
  • Eighteen Months Post-Halving: Bitcoin rose nearly eightfold.

Future Projections

Based on historical data, significant appreciation is expected in the current, fourth halving cycle. Analysts like Chamath and his team have calculated what the implied pricing would be if the past repeats.

  • One Month Post-Halving: Bitcoin could reach around $73k
  • Three Months Post-Halving: The price might rise to around $77k
  • Six Months Post-Halving: Bitcoin could hit $99k
  • Nine Months Post-Halving: The price might soar to $238k
  • One Year Post-Halving: Bitcoin could reach $362k
  • Eighteen Months Post-Halving: Bitcoin could hit anywhere from $497,000 to at 16.1x gain and reach $1,140,000.

Potential Gains and Market Dynamics

While historical data suggests substantial gains are on the cards, it’s important to note that the 18-month post-halving gains have been decreasing in each cycle.

If this trend continues, the gains in the fourth cycle could result in a price closer to $130k. It can’t be overstated that predicting Bitcoin’s price over the next 18 months is very challenging, with estimates ranging from $130k to $1,140,000 but if prices anywhere in that range are realized, BTC returns will likely wipe the floor with most other investment vehicles. And with almost $1 billion in ETF inflows recently to bitcoin ETFs, there is little reason to bet against the cryptocurrency at this stage of the cycle.