As Bitcoin enters a new halving cycle, historical trends offer powerful clues for long-term investors and traders alike.

Bitcoin, the world’s premier digital currency, has a built-in mechanism that makes it both scarce and intriguing: the halving. As we move away from day zero of the fourth halving cycle, which occurred on April 20, 2024, it’s the perfect time to explore how Bitcoin’s price has historically reacted to these events and what this might mean for its future price trajectory.

What Are Bitcoin Halving Events?

First, let’s break down what a halving is. Bitcoin operates on a decentralized blockchain where miners validate transactions and are rewarded with newly minted Bitcoin. The halving is a pre-programmed event that occurs approximately every four years, or after every 210,000 blocks, reducing the block reward for miners by half.

This mechanism, coded into Bitcoin’s protocol, ensures that Bitcoin’s total supply—capped at 21 million coins—is released gradually, mimicking the scarcity of precious metals like gold. The first halving in 2012 reduced the block reward from 50 BTC to 25 BTC. The second in 2016 brought it down to 12.5 BTC, the third in 2020 to 6.25 BTC, and the fourth, which happened last year, slashed it to 3.125 BTC per block.

This reduction in new supply entering the market creates a supply shock, and if demand remains steady or grows, basic economics suggests the price should rise. Historically, that’s exactly what we have seen—though the magnitude and timing of these price surges have varied.

Historical Price Patterns Following Halvings

Each previous halving has triggered a distinct market cycle characterized by significant price appreciation followed by correction phases:

• First Halving (2012): Bitcoin's price increased from around $12 to a peak of approximately $1,100 in the following year – a staggering 9,000% increase.

• Second Halving (2016): Starting at roughly $650, Bitcoin climbed to nearly $20,000 by December 2017 – representing a 2,900% gain.

• Third Halving (2020): Beginning at about $8,600, Bitcoin surged to an all-time high of nearly $69,000 in November 2021 – a 700% increase.

While each cycle delivered impressive returns, it's worth noting the diminishing percentage gains across successive halvings – a pattern that many analysts attribute to the cryptocurrency's increasing market capitalization and maturity.

The Fourth Halving: What Can We Expect?

Now, let’s turn to the fourth halving. On April 20, 2024, Bitcoin’s price was $63,000, according to the chart from Ecoinometrics (above). If Bitcoin follows a similar growth trajectory to the previous three cycles, what might its price look like over the next couple of years? The chart provides a compelling visual.

The light blue area represents the price range we would expect if Bitcoin’s growth mirrors the patterns of the past three halvings, while the dark blue line traces the geometric average growth trajectory—more appropriate for capturing Bitcoin’s exponential price movements. Starting at $63,000, the analysis suggests Bitcoin could reach anywhere between $140,000 and $4,480,000 per coin within the next cycle, with the average growth trajectory pointing toward significant gains.

• Lower Bound ($140,000): This would represent a 122% increase from the halving price, a more conservative outcome compared to past cycles but still substantial. It aligns with the diminishing returns trend as Bitcoin’s market cap grows.

• Upper Bound ($4,480,000): This astronomical figure would require a 7,011% increase, echoing the explosive growth of the first halving. While possible in a scenario of massive adoption and FOMO-driven buying, it’s less likely given Bitcoin’s current scale and market dynamics.

• Average Growth Trajectory: The dark blue line suggests a middle ground, where Bitcoin could climb steadily, potentially reaching $1,120,000 (a 1,678% increase) within a couple of years, based on the geometric average of past cycles. This would still be a remarkable run, outpacing the third halving’s 685% gain.

Why Such a Wide Range?

Bitcoin’s price volatility and the varying conditions of each halving cycle explain the wide range. The first halving occurred when Bitcoin was a niche asset with a tiny market cap, making massive percentage gains easier. By the fourth halving, Bitcoin is a trillion-dollar asset class, meaning larger absolute price movements require significantly more capital inflow.

Additionally, macroeconomic factors—like interest rates, inflation, and global adoption—play a bigger role now than in earlier cycles. For instance, if institutional adoption accelerates or if Bitcoin becomes a widely accepted hedge against inflation, the upper end of the range becomes more plausible. Conversely, regulatory crackdowns or a global recession could temper gains.

What This Means for Bitcoin’s Future?

Standing on day zero of the fourth halving cycle, the historical precedent is clear - halvings tend to kick off bull runs. If Bitcoin follows a similar trajectory, we are likely in for an exciting few years. The average growth path suggests Bitcoin could hit seven figures, a milestone that would solidify its status as a transformative asset. Even the lower bound of $140,000 would be a strong performance.

However, Bitcoin has never been shy of surprises. External factors—ranging from technological advancements like the Lightning Network to geopolitical events—could push Bitcoin beyond expectations or lead to unexpected corrections. The key takeaway is that the halving’s supply shock, combined with Bitcoin’s growing demand as a store of value, positions it for potential growth, but the exact path remains uncertain.

For investors, this cycle offers both opportunity and caution. The historical data is bullish, but Bitcoin’s maturing market means past performance isn’t a guaranteed predictor. Whether Bitcoin hits $140,000 or soars to $4,480,000, one thing is certain: the fourth halving cycle will be a fascinating chapter in Bitcoin’s story.

Originally published on Substack.

Disclaimer:

The information provided in this article is for informational and educational purposes only and does not constitute financial or investment advice. The projections discussed are based on historical patterns and do not guarantee future performance. Cryptocurrency investments are highly volatile and carry significant risk. Always conduct your own research before making any investment decisions.