The next Bitcoin halving

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Bitcoin halving is a pre-determined event that takes place every 210,000 blocks mined, which is roughly every four years.

During the halving, the amount of new bitcoins that miners receive as a reward for creating new blocks is reduced by 50%. This means that the supply of new bitcoins entering circulation is reduced, which can create a supply shock that increases demand and drives up the price.

The next Bitcoin halving is expected to happen around March-May 2024.

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Previous Bitcoin halvings

Image 1: Bitcoin halvings[2]

Bitcoin has had three halvings so far, in 2012, 2016, and 2020 (May 11). The next Bitcoin halving is scheduled to take place in around March 2024 at block 840,000:

  • Genesis block of Bitcoin: 3 January 2009 (50 BTC per new block rewarded)
  • 1st Bitcoin halving: 28 November 2012 (25 BTC per new block rewarded)
  • 2nd Bitcoin halving: 9 July 2016 (12.50 BTC per new block rewarded)
  • 3rd Bitcoin halving: 11 May 2020 (6.25 BTC per new block rewarded)
  • 4th Bitcoin halving: ~March 2024 (3.125 BTC per new block rewarded)

During each halving, the price of Bitcoin was in the middle of the cycle top and cycle low. There were no new all-time highs or lows during the halving events.

However, the Stock-to-Flow model (S2F) predicts that shortly after each halving (usually after few months) Bitcoin always reached a new all-time high price.

Stock-to-Flow model

Image 2: Stock-to-Flow model [1]

The Stock-to-Flow model has been historically accurate in predicting the price of Bitcoin. It suggests that after each halving event, the price of Bitcoin should increase significantly due to the reduced supply. In addition, the model predicts that the price of Bitcoin will continue to rise over time as it becomes even scarcer, with some projections suggesting that Bitcoin could reach prices of over $100,000 or even $1 million in the coming years.

Yet, you have to know that the S2F model has also faced criticism sometimes being off its trajectory for extended periods of time.

Percentage Gain and Loss

To further understand the price movements, we analyzed the percentage gain and loss of the price at each previous halving event. The first halving saw a price drop of 60% from the top and a 500% increase from the bottom. The second halving had a 50% decrease from the top and a 265% increase from the bottom. The third halving had a 55% decrease from the top and a 190% increase from the bottom.

Bottoming Out

Bitcoin's price seems to have bottomed out in November 2022, which is approximately 17 months before the fourth halving event. This timeline lines up with the previous halving events, which occurred 18 to 19 months after the bottom. We can expect short-term bull and bear trends, leading to sideways action leading up to the fourth halving.

Estimated Price

Using the previous percentage loss trends, we can estimate the price of Bitcoin leading up to the fourth halving. A 50% loss from the top would put the price at around $35,000. Using the 50% calculation from the cycle low, we can expect a 135% increase from the bottom, which aligns with the previous percentage gain trends from the previous halvings.


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References

  1. LookIntoBitcoin, Stock-to-Flow model, 11.02.2023: https://www.lookintobitcoin.com/charts/stock-to-flow-model
  2. Twitter, @ChartsBTC, 11.03.2023: https://twitter.com/ChartsBtc