The three primary aspects of Bitcoin analysis are sentiment, fundamental analysis and technical analysis. Whether a trader or investor or cypherpunk, we are always keen to know as much as possible regarding all the details of our bitcoin charts so that we can be informed and thus profit from this revolutionary cryptocurrency that is taking over the financial world with its admittedly wildly volatile price swings. As powerful as Bitcoin is, it’s like a wild and untamed elephant, and just as many speculators have lost money, as those that have profited, even though Bitcoin has actually been on a lifelong overall “uptrend” primarily.
No need to be losing any money on your Bitcoin investments, since the easiest procedure is simply to buy and “hodl”, or buy the dip and sell the tops. Much easier said than done though, since very few can predict the dip or the top, and inexperience in the market can lead some traders to panic sell at a loss, instead of cultivating “strong hands” and keeping the faith in the technology and its potential to change our world for the better. This tendency here to sell at the wrong time is based on the first principle of analysis, namely sentiment. When sentiment is negative or bearish, people get fearful and sell when they see the price falling, which is, of course, understandable human nature, though it shows how easily we can be swayed by emotions stoked by FUD (fear, uncertainty and doubt), which should certainty be avoided by the discerning investor or trader.
Current sentiment – if we go by stats regarding Bitcoin-related Tweets – is at something of a major low point. Twitter mentions of #Bitcoin are down noticeably, as are Google searches, which initially is a bearish indicator. And sentiment – despite being the most irrational and illogical or all indicators – has a tendency to lead the herd, who invariably are usually wrong. Nothing to be done about human psychology in this regard, except learn to think like a “contrarian” or at least outside the herd, or to become better informed.
Now when it comes to FA (fundamental analysis) of Bitcoin, we look at things like hash rate (which ironically is at an all time high), mining costs, financial regulation, etc. And this is where the halving comes in. The Bitcoin “halving” is a core part of the architecture of the original Bitcoin design, given to us by Satoshi Nakamoto. Built into the design of Bitcoin are regular predictable halving of the reward paid to miners every few hundred thousand blocks mined, which turns out to be every four years or so. The current block reward is about to be cut from 12.5 BTC to 6.25 BTC for miners, every ten minutes. In this way it takes longer for Bitcoin to be mined as the difficulty increases, and the price rises. This is the perfect math behind the design of Bitcoin that makes it deflationary, and that makes it work as a store of value, scarcer than gold itself.
This overlaps with the third aspect of price prediction, namely technical analysis because it is by looking at historical market data that the technical analysts make their predictions about potential future trends, or patterns repeating themselves in the beautiful Fibonacci (Golden Ratio) fractal that some say is seen in the Bitcoin price cycles. And indeed, there are distinct patterns to be observed in the way Bitcoin price cycles play out, based on its mathematical design. However, when FA and TA concur, this is all fine, but sometimes they show a divergence, so past price action does not imply exact fractal-like repetition. Today’s fundamentals may be different, and therefore price action will also be different this time around.
The upcoming halving of May 2020 will be the third for Bitcoin, the previous two being in 2012 and 2016, and although there were similarities in each past halving and the price action around it, there were also differences. Besides that, only two prior halvings is not really enough historic data to base a prediction on for the next big event. And the current imminent recession in the global economic picture is also unique compared to the previous occurrences. Having said that, there are some overall patterns that we can expect with the upcoming halving. After all, the fundamentals are much the same in regard to the actual design of the Bitcoin code itself. So let’s look into what we can expect for certain and what may be uncharted territory, because both sets of data exist. And experts will disagree on how to interpret the data too.
For example experts like famous Bitcoin bull Willy Woo, in his recent Twitter post says:
“NEVER gone into a halvening in BEARISH price action, miners already capitulating adding sell volume. Historically we front run with a BULLISH setup, miner capitulating only after halvening when revenues are slashed. This is a unique setup. Quite bearish leading up to the event.”
The analysis says that the Bitcoin halving is a major catalyst that always leads to the beginning of the next major bull market cycle. Both halvings showed a rally of 12-13 000% in price each time, although there were differences in the exact timing:
Halving1: 513 days to rally 13 304% from pre-H bottom of $2.01 to post-H top of $270.
Halving2: 1068 days to rally 12 168% from pre-H bottom of $164.01 to post-H top of $20k.
As you can see, there were indeed similarities but also noticeable differences. And this time it will also be the same...but different. Already Bitcoin has pumped almost 400% since the bottom of around $3100 in early 2019, which was 544 days before the next halving. A natural retrace in price usually occurs before the halving of around 50%, and that’s where we are now in the cycle as I write this. We had an unusually fast parabolic pump since the local bottom just over $3100 earlier this year, and thus the strong retracement from the recent high of $14 000 back down to $7500 at one point, which is almost 50%. But although the general pattern is repeating itself at each halving, they all have unique variations.
Personally I suspect that we may trade sideways – with volatile swings - until the halving in May 2020, six months from now. We may actually still fall even further down to earlier support at around $6 000, which is the break-even price for some miners (outside China), so don’t be surprised if that plays out. Fundamentally miners indirectly control price. At certain prices it becomes unprofitable for small miners and they close down their rigs, or sell their BTC to pay for expenses or lock in at least some small profit. This can end up pushing the price still lower, so watch out for this shakeout. Historically we won’t see new ATH (beyond $20 000) until several months after the halving. But best case scenario is that we can optimistically expect BTC price to gain another 12 000% from the bottom around $3 100. This would take the price to about $385 000, as mind blowing as it sounds. Yet this is exactly what happened after both previous halvings.
Time wise we’re looking at the next ATH (all time high) to be around 500 days after the halving, which is late 2021, so just “hodl” folks, we have a couple of years to go still. The logic is in the math. It’s built in to the code. Other than some perfect storm event like the global recession, or some manipulation by the new influx of “traditional financial tools” like margin trading, futures, even the questionable Bakkt, etc, or some regulatory clampdown by the SEC (securities exchange commission), or Chinese government, we can look forward to a post-halving price pump until late 2021, at which point we should sell the top as it lands on the moon. I hope you have your ticket because I would love to see you there.
