Marc Munier | Nov 17, 2023 09:27AM ET
Bitcoin 4th Halving is on April 24th, 2024 - in about 5 months.
What should you make of it?
What is Bitcoin Halving?
Bitcoin halving is an event that happens approximately every four years where the reward for mining new Bitcoin transactions is cut in half. This means that miners receive 50% less Bitcoin for verifying transactions and adding them to the blockchain.
The halving is built into Bitcoin's code and it serves to slow down the rate at which new Bitcoins are created, making it more scarce over time. This is often compared to a reduction in supply, like cutting the production of new gold in half, which could affect the price if demand remains the same or increases.
As I said, we’re about 5 months before the next Halving.
So I checked what happened (with Bitcoin Price) 5 months before each of the previous 3 halvings, and looked at the price 12 months after the Halving date (D), together with the highest price we’ve seen after a halving (and before the next one).
The results look like this:
Let’s take Halving #3 as an example. It happened on May 11, 2020, when Bitcoin price was about $8500.
This is the logarithmic chart of Bitcoin:
This is a very clear and visual rendition of Bitcoin halvings.
It just goes up...
Why Look at Log charts?
Logarithmic charts are useful, especially for things like Bitcoin prices, because they can help us see percentage changes more clearly rather than just absolute number changes.
When you look at a linear chart, the distance between the numbers on the chart is always the same, no matter the value. So, if the price of Bitcoin increases from $1 to $2, that move looks the same as if it increases from $100 to $101, even though the percentage increase is very different (100% vs. 1%).
In a logarithmic chart, the scale changes so that the same distance on the chart represents the same percentage change, not the same absolute dollar change. This makes it easier to compare relative growth rates over time. For assets like Bitcoin, which has had huge percentage increases and decreases in its history, a logarithmic chart helps to show the trend more clearly without the most recent price changes overshadowing everything else.
Past performance is not indicative of future results, and the historical trend of an asset does not guarantee the same trajectory in the future.
That being said, looking at the table above, we (of course) cannot predict anything, but all the performances are (very) positive, especially after the halving dates.
Still, if we bought Bitcoin 5 months before the halving dates, we were positive on each occasion.
Here are the main takeways:
“History doesn't repeat itself, but it often rhymes” (attributed to Mark Twain)
The past halvings have set a precedent of bullish trends, yet each follows its own unique path influenced by a myriad of factors.
…So I guess risk takers (and math lovers) might consider to go extra long on Bitcoin.
Disclaimer: The content of this article is purely informational and does not in any way represent an investment advice or recommendation to buy or sell any commodity.
This article was originally published on the Trading & Investing newsletter, read by a community of traders, private investors and financial advisors. .
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.