Bitcoin: One Year Out from Quadrennial Halvening, Get Ready for Chaos
In roughly 367 days, bitcoin (BTC) will undergo its third quadrennial halvening event. If history is any indication, the market in two years’ time could look vastly different from the one we see today. As it turns out, bitcoin not only rallies into the halvening, it goes parabolic long after the historic event takes place.
Bitcoin Halvening in Perspective
Using current mining trends as a benchmark, the next halvening event is expected to take place on May 23, 2020 or 210,000 blocks from the previous reward drop. After May 23, the reward for mining a single block will drop to 6.25 BTC from the present rate of 12.5 BTC.
In a recent Twitter post, cryptocurrency analyst The Rhythm Trader outlined what the halvening event will mean for bitcoin’s price.
Price one year before first halvening : $2.55
Price one year after first halvening : $1,037
Price one year before second halvening : $268
Price one year after second halvening : $2,525
Price one year before the third halvening: $7,100
Price one year after the third halvening:
— The Rhythm Trader (@Rhythmtrader) May 17, 2019
One year out from the first quadrennial halvening, bitcoin was valued at $2.55. Two years later (or one year after the halvening), it had gained a whopping 40,500%.
In the year before the second halvening, bitcoin was priced at $268. It would go on to gain over 852% over the next two years.
Clearly, this has major implications on the May 2020 event. For cryptocurrency investors, it suggests that a multi-year bull market is underway. This just so happens to coincide with the start of a new four-year cycle.
This has already created a sense of urgency among market participants, as evidenced by the sustained rise in bitcoin’s value since the start of 2019. Not all of this is tied to the anticipated reward drop, but the accumulation game is clearly underway. Bitcoin’s long-term holders are already preparing for the day when scarcity limits their ability to accumulate more virtual currency.
In a recent article, Hacked identified five reasons for bitcoin’s sharp and sustained breakout in 2019. At least three of the five reasons are tied to accumulation, i.e. investors buying more bitcoin without spending it or maintaining their stash from the previous bull market.
As The Rhythm Trader recently pointed out, 60% of all BTC have not moved in one year. That’s equivalent to 10.5 million BTC being held as a store of value.
60% of all bitcoins have not moved in one year.
That's 10.5 million bitcoin being held as a store of value for the last 12 months.
This is a game of musical chairs. The music has stopped and these investors already found a chair to sit on.
— The Rhythm Trader (@Rhythmtrader) May 18, 2019
Bitcoin’s store-of-value characteristics were also cited as a primary reason for its strong performance this year. More and more investors are using BTC as a haven asset to hedge against global uncertainty. This has made bitcoin the best-performing asset class of 2019, vastly outperforming the S&P 500, commodities, bonds, etc. Read more: How Does the Bitcoin Rally Compare to Crude, Stocks and Lean Hogs?
Bitcoin’s value swung back below $8,000 on Tuesday, as price action narrowed from the latest bout of volatility. At press time, the BTC price was valued at $7,931 on Bitstamp, down 0.9%.
The moderation in bitcoin’s upward trajectory has allowed the price to ease from extreme overbought levels. With an RSI of 67, momentum is firmly on the side of the bulls for now.
At current values, bitcoin has a total market capitalization of around $140 billion. Its dominance rate has fallen to around 56.7% from highs of around 60% earlier this month.
Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock. Charts via TradingView.