It’s fair to say that, until recently, the much-anticipated Bitcoin (CRYPTO: BTC) halving had largely been underwhelming. At the time of the halving on April 19 — when Bitcoin mining rewards were cut in half — Bitcoin was trading near $64,000. For much of the next month, Bitcoin traded down or sideways, even dipping below the $57,000 level.
But it’s too early to give up on the halving’s potential to juice Bitcoin’s price. After all, most halving cycles last anywhere from 12 to 18 months, and there’s still plenty of time for the halving effects to kick in. So, what can we expect from this halving in the months ahead, and just how much higher can Bitcoin go?
Data from previous Bitcoin halvings
The biggest reason for optimism is Bitcoin’s price performance after the previous halving events that took place in 2012, 2016, and 2020. In each case, Bitcoin skyrocketed to a much higher price, setting a new all-time high in the process. By the time the 2020 halving cycle was over, Bitcoin had soared to a then-all-time high of $69,000.
|
Halving Event |
Bitcoin Price at Halving |
Bitcoin Price |
|---|---|---|
|
2012 |
Near $12 |
$135 |
|
2016 |
Near $650 |
Near $1,550 |
|
2020 |
Near $8,600 |
Over $50,000 |
|
2024 |
Near $64,000 |
??? |
Of course, past performance is no guarantee of future performance. But it’s easy to see why so many analysts were expecting huge price gains for Bitcoin this year. Prior to the 2024 halving, there had been three halvings, and each one brought huge, outsized gains for Bitcoin.
What happened this time?
A number of reasons have been offered as to why Bitcoin price gains have been so underwhelming since the recent halving. One potential explanation is that market participants had already priced in the effect of the halving. This makes a lot of sense if you believe in the efficient market hypothesis. Investors have known the date of the halving for four years, so they had plenty of advance notice.
Another explanation involves the new spot Bitcoin exchange-traded funds (ETFs). The introduction of these ETFs in January sped up the timeline for Bitcoin price appreciation. Bitcoin typically hits a new all-time high after the halving. This time, Bitcoin hit a new all-time high in mid-March, nearly one month prior to the halving. From this perspective, Bitcoin simply peaked too early due to the huge influx of new investor money at the start of the year.
Thus, if you were hoping to become an overnight Bitcoin millionaire as a result of the halving, you’ll need to readjust your expectations. These things take time. And in the case of the Bitcoin halving, it could take as long as one year to see the full impact. Take a closer look at the phenomenal returns attributed to the first three Bitcoin halving cycles. It required 300 days or more to generate those eye-popping results.
Will Bitcoin ever hit $1 million?
It’s encouraging that some Wall Street analysts are actually doubling down on their earlier price forecasts for Bitcoin. Investment firm Bernstein, for example, still thinks Bitcoin will hit $150,000 by the end of next year. That implies a more than doubling from Bitcoin’s current price of $70,000. And Cathie Wood of Ark Invest now believes Bitcoin will hit a price of $1 million sometime before 2030, primarily due to the phenomenal success of the new spot Bitcoin ETFs.
When you dig into the numbers Wood used to make her original $1 million price forecast, you can get a much better grasp of just how well Bitcoin needs to perform after the halving. In a bull case scenario, she assumed 75% annualized returns for Bitcoin, which led to an ultimate price of $1.48 million by 2030. In a bear case scenario, she assumed 40% annualized returns for Bitcoin, which led to a price of $258,000.
Those assumptions might sound incredibly high, but they largely align with Bitcoin’s previous price performance. From 2011 to 2021, for example, Bitcoin delivered annualized returns of 230%. In 2023, Bitcoin soared in value by more than 150%. And thus far this year, Bitcoin is already up 65%. So, who says Bitcoin can’t deliver annual returns of 75% or higher?
Yes, it will take a lot for the ultimate Bitcoin millionaire-maker scenario to happen, but it’s not out of the range of possibilities.
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Dominic Basulto has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
Prediction: The Bitcoin Halving Could Be a Millionaire Maker was originally published by The Motley Fool