$100,000 - a fabled, and hopeful valuation for one Bitcoin, as penned by cryptocurrency enthusiasts, and investors around the world. Those who have dipped their toes into the world of cryptocurrencies will remember those early days, when we made up high, seemingly unimaginable guesses into where Bitcoin will go next.
It's a habit that never changed. When Bitcoins were valued at cents on the dollar, we hoped that it will one day be worth $10. Once Bitcoin had gone past that, we hoped that it will one day be worth $100. As euphoria sets in, the cycle continues.
Up it goes, from $100, to $1000, and then to $10,000. Now we come to the question of where it will go next. $100,000, perhaps, or maybe even $1,000,000? One can guess, and the markets will duly react as needed - right, or wrong.
So, what's going to happen?
Among the most anticipated event in Bitcoin's short history, is the Halving - a naturally programmed phenomenon, where Bitcoin will halve its block rewards for mining. The 3rd Halving is estimated to happen 115 days from now, on the 12th of May, 2020.
There remains only around 2,800,000 Bitcoins untapped, as it will deplete its 21,000,000 circulation in the near future, likely after the 4th Halving in 2024 AD.
Bitcoin, along with other cryptos, have been on a tear lately, having risen nearly 25% since the beginning of 2020, as highlighted in my previous article, here. So, why is Halving so popular, and why is it continuously referenced when discussing Bitcoin's price?
Bitcoin works on a deflationary economic model, where supply decreases over time. Simply, it's the mechanics of supply and demand that surrounds it. Once Bitcoin halves its mining rewards, it will make the supply ever more scarce, and amid growing demand, there is hope that Halving will push the prices up.
PlanB's Stock-to-Flow (S2F) Model has long been referenced as a guideline for Bitcoin's future price performance based on supply scarcity.
With much going on in the cryptocurrency space, the 2020 Halving event has speculators and analysts scratching their heads, into the potential ceiling for Bitcoin's price. Naturally, there is strong consensus that Bitcoin will surge, either rapidly, or (most likely ) steadily upwards, but then comes the question - where does it stop, and how long will it take to get there?
As we're 4 months away from Halving, could Bitcoin possibly reach that mystical 6-digit valuation? Since I was pondering this myself, I had planned some simple calculations to deduce an estimate.
Now, looking at my chart here; comparing the 1st and 2nd Halvings - there was an increase in the amount of time taken, and a simultaneous decrease in percentage of gains, between the bottom and top price points.
Post-Halving 2012 - it took Bitcoin 367 days to get from its $12 low, to its $1,200 high, gaining roughly 9,631%.
Post-Halving 2016 - it took Bitcoin 502 days to get from its $480 low, to its $20,000 high, gaining roughly 3,973%.
Comparing the 1st and 2nd Halving, there was a 36.78% increase in the time taken (we'll round it off to a modest 36% ), and there was a 58.75% decrease in the net gains, between the respective lows and highs that occurred after those Halving periods.
So, by taking into account those percentages, we'll try to roughly deduce how high Bitcoin will go following the next Halving, and how long it might take it to get there. Now, be sure to take into consideration, that we're working with a small sample size, with only 2 previous Halving periods to go off, yet it's better than nothing.
Here's the baseline - we're making the assumption that Bitcoin's bottom is marked during the Halving period itself, on May 12th 2020, with an estimated low of $8,800, which was a rough trace following Bitcoin's historical support line.
So, how much?
There was a 58.75% decrease in gains between low and high, from the 1st to 2nd Halving. Conversely, the following Halving only had 41.25% of the gains from the previous one, at 3,973%.
(y/3973) x 100 = 41.25
100y = (41.25)(3973)
y = 1638.87 (~1639)
So, now we can deduce, that 2020's Halving could yield an upside of 1639% from its post-Halving low.
(y/8800) x 100 = 1639
100y = (1639)(8800)
y = 144,232
Hence, we can say that a post-2020 Halving high, following an estimated bottom of $8,800, is around $144,000.
So, how long will it take to get there?
There was a roughly 36% increase in the time taken to get from bottom to high, from the 1st to 2nd Halving, which the latter took 502 days.
((y-502)/502) x 100 = 36
100(y-502) = (36)(502)
y = 682.72 (~683)
We can deduce that it will take roughly 683 days to get from post-Halving 2020's lows to highs.
March 12th 2020 + 683 days = March 26th 2022
Hence, we can say that Bitcoin's post-Halving 2020 highs will be reached at, or around March 26 th 2022.
So, following those purely technical-biased calculations, we can assume that Bitcoin's post-Halving 2020 valuation will reach a ceiling of $144,000, sometime before the end of March, 2022.
Once again, it's worth stressing that these calculations are based on Bitcoin's historical performance following the Halving period, in itself a rare event, and provides little data to work with. This estimate also doesn't take into consideration of other technical indicators, or macro-economic trends, which would effect Bitcoin's post-Halving price.
Another thing to bear in mind, is that Bitcoin's post-Halving bull-runs usually end up with a roughly 83% correction following its highs - which, following a rally to $144,000, will eventually correct back down to about $24,000.
That said, Bitcoin's future performance has more than often been predictable, assuming that you take a look at the wider picture, or in the case of charts - the larger timeframe. Many Bitcoin traders, myself included, have often advised against looking into the shorter timeframes, such as trading hourly or daily, and instead focus more on swing trading, and looking to capitalise on gains that occur over the period of weeks, months, or years.
All in all, I think Halving 2020 will be a great event for any cryptocurrency enthusiast to watch over. More than that, it also presents itself as an incredible investment opportunity, and if you have been contemplating on when to start buying in - now would be a good time to start averaging.
Where do you think Bitcoin will go next, and what predictions have you made up? Share in the comments below, and let's see who get's closest!