WHEN WILL THE HALVING MARKET COME?

Less than a year away from Bitcoin halving, when will the halving market come?

Bitcoin may peak within 12 to 18 months after the April 2024 halving.

The most exciting property of Bitcoin (from an investment perspective) is “increasing scarcity”. Bitcoin is the first (and only) asset in history to offer a reliable guarantee of increasing scarcity in its supply issuance.

You’ve probably heard the old adage that land is a good investment because “it’s the only thing that’s not being made anymore”. This simple wisdom is true and very powerful – the global land supply is “finitely scarce”.

But oddly enough, from an investment standpoint, even better are their dwindling assets. That’s why a Michael Jordan rookie card is valuable, or a Van Gogh or a Picasso. Once upon a time, they used to make these items…and now, they don’t make them anymore. These are examples of all-or-nothing “increasing scarcity”.

Over time, Bitcoin exploits “increasing scarcity” to drive reliable appreciation in purchasing power. However, it did not trigger the scarcity switch in time for the desperate moment. Instead, from 2009 all the way to 2140, the phenomenon is spaced out in the exponential decay of new supply issuance that we are all witnessing firsthand.

This process is not a perfectly smooth trend running in the background – instead, it is characterized by a punctuated balance. Every four years, a very special event occurs: the halving.

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What is Bitcoin Halving?

This is Bitcoin’s supply release schedule. what does that mean?

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The day Bitcoin was launched in January 2009… 0 Bitcoins existed. Ultimately, there will be a cap of 21 million bitcoins, the absolute maximum. But how do you go from 0 to 21 million?

The founders of Bitcoin took a very clever approach – by rewarding bitcoins to incentivize those who provide computational security to the network (“mining”). Even more ingeniously, he designed this system so that the issuance of bitcoins is halved every four years. This creates an incredible scarcity-growth property – something that no other asset in the real world has ever had. The result is an unimaginable property: over time, bitcoins become more and more valuable.

The mechanical magic of this system is achieved by “halving”. These are the moments that permanently halve supply issuance and occur every four years (see dotted line in graph above).

Amazingly, this event triggered the operation of the supply and demand mechanism.

Simple Code – World Chang Impact

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This simple functionality is hardcoded into the Bitcoin protocol. It doesn’t look like much, but it’s Bitcoin’s entire monetary policy — written in stone since day 0.

Here’s what it means. First, the code counts how many halvings have occurred. The halving is scheduled to occur every 210,000 blocks (approximately 4 years, since a new block is produced on average every 10 minutes).

Next, determine the number of new bitcoins issued with each new block. This is calculated by dividing 50 by 2 after each halving.

The result is that for the first four years, every block miner gets 50 new bitcoins. After the first halving, the number of bitcoins issued per block is reduced to 25, and until the next halving (4 years later), the number of bitcoins issued per block is reduced to 12.5.

This pattern of reducing bitcoin issuance every four years will continue until 2140, when no more bitcoins will be issued.

Right now, Bitcoin’s supply is inflated by about 1.8% per year. By April 2024, the fourth halving will take place, and suddenly Bitcoin’s supply inflation will drop to 0.9% per year.

This would make Bitcoin a “harder” asset than gold, as global gold mining increases the gold supply by 1.5-2% per year.

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everything is supply and demand

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When the creation of new supply is halved, it creates a supply shock that upends the existing supply-demand-price balance. Suddenly, there isn’t as much new supply on the market to meet demand.

Currently, about 900 bitcoins are released per day (6.25 BTC/block x 6 blocks/hour x 24 hours/day). At a price of about $30,000 per bitcoin, that means about $27 million in bitcoins are created and sent to bitcoin miners every day.

That’s a lot of money. Every month, approximately $900 million in new bitcoins are created. In order to keep the price stable (as it is currently), the inflow of demand for Bitcoin must also remain at about $900 million per month. If it is less than this amount, the price will fall; if it is more than this amount, the price will increase.

This is why each halving is so exciting for Bitcoin holders.

Assume that the price of Bitcoin remains at $30,000 per coin until the next halving at the end of April 2024. When the halving happened at block 840,000, suddenly the supply created and issued on the market was halved to meet the influx of demand.

Only $450 million of Bitcoin will be created every month, but there will be $900 million in demand. It’s a guaranteed, predictable, reliable supply shortage. It will start in April 2024.

The only way a free market can resolve a supply-demand imbalance (since Bitcoin’s supply schedule is perfectly inelastic) is for the price to rise. This supply shortage will build up over time, and buyers will naturally increase their bids to find willing sellers.

It’s purely supply and demand. However, more than 99% of people have no idea that this will happen next year – they have never even heard of Bitcoin’s halving.

And you’re reading this, which means you’re now in that 1%. This is called information asymmetry – you have an advantage over the rest of the world.

So, what impact have past halvings had on the price of Bitcoin?

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How Bitcoin has performed after past halvings

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In Bitcoin’s 14-year life cycle, there have been three halvings – in 2012, 2016 and 2020. In the 12-18 months following these events, Bitcoin experienced its major bull run. (You may have first heard about Bitcoin during its insane rally in 2013, then were surprised to see it rally again in 2017, and again in 2021.)

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Here’s a chart of those rallies (note: the y-axis here is on a logarithmic scale, which means the visual space between $1 and $10 is the same as the visual space between $1000 and $10000):

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This picture tells the whole story. But trying to make sense of this data and the noise in it can be a bit overwhelming. So, let’s simplify it – all you need to know is:

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Each colored line represents the change in price over the four years after the halving (expressed as a percentage, based on the price when that halving occurred)

As you can see, each colored line rises sharply in the first 1/3 of the chart, falls in the next 1/3, and then rises (slowly) in the last 1/3

This is the pattern. It’s that simple.

Those with little knowledge of Bitcoin would consider such a pattern to be accidental and think it foolish to expect it to happen again. (After all, “past performance is not indicative of future results.”) The problem is, in this case… when block 840,000 on April 27, 2024 puts the mechanics of supply and demand into practice, this will happen again.

So, what will happen to the price of Bitcoin?

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My Fundamental Bitcoin Price Action Predictions for 2024-25

First, Bitcoin’s volatility and noise make everyone routinely wrong in predicting what Bitcoin will do — myself included. However, despite the noise, we can make rough predictions about where Bitcoin will go.

Here’s how Bitcoin has performed from halving date to price peak after the three halvings so far:

There are a few points worth paying attention to:

• Halving to price peak time is fairly stable in the 12-18 month range
• The price increase after each halving decreases successively

However, it’s worth noting that the 2021 price peak is the first cycle in Bitcoin’s history to not have a price peak (instead, it’s a two-part dome). This is due to a combination of the following three forces causing prices to peak lower than they would otherwise have been:

• Highly leveraged long positions (this inhibits upward price action)
• Summer 2021 Chinese Mining Ban Leads to Massive Panic and Bitcoin Sales to Fund Relocation of Chinese Miners
• Fed shifts to quantitative tightening in Q4 2021

Therefore, I still think that if these things did not happen, the price peak of Bitcoin could be higher.

Overall, I expect Bitcoin to peak within 12 to 18 months of the April 2024 halving. This implies a bullish price peak between April 2025 and October 2025.

In terms of price, my base case prediction is that this price peak will be 4-8 times higher than the price at the time of the halving. Assuming a price of $30,000 (could actually be higher), then the bull market price peak would be $120,000-240,000/Bitcoin.

If this sounds crazy to you…it’s not. See how ordinary this price is compared to the recent halving era:

This will be followed by another bear market, and then a period of price equilibrium until the Bitcoin halving in 2028 arrives to start the whole process again.

My belief in these mechanisms is that I think Bitcoin is the best savings vehicle for the next decade – as Paul Tudor Jones said, “the fastest horse”.

However, most people don’t know what will happen with the next halving in less than a year next year.