So, in this analysis we're going to try to predict the price of Bitcoin against the US Dollar for around the 12 May (on the 3rd Bitcoin Halving Event!). We're also going to try and predict the future price of this asset through to the 4th halving event in 2024 - these predictions are based on chart analysis of BTCUSD from 2012-Present.
We're big fans of clean charts with easy to read indicators on - so we've tried to make this as easy to understand as we can for you all, both visually and written down. Let's assume you know at least a little bit about Bitcoin , and the technology behind it; but what's the halving event everyone's talking about? What's this got to do with Mining? Why would this affect the price? Let's go through a few things before we dive into the analysis...
What is Bitcoin Mining?
Mining Bitcoin is essentially using special hardware/software to solve math problems which, in turn, approves and adds records or transactions to Bitcoin's public ledger (or block chain). This block chain confirms the transactions to have taken place to the rest of the network. Miners are rewarded for their efforts in Bitcoin which provides a safe, logical and fair way for the currency to be distributed, and also adds a pretty good incentive for people to mine themselves.
What is a Halving Event?
We know that miners are rewarded for their computational efforts with Bitcoin , but how much do they get, and how often? Well, miners are rewarded a certain amount of Bitcoin once a "block" is produced (approx every 10mins). Before the first halving of Bitcoin miners would be rewarded 50 Bitcoins per block.
This reward will half on every halving event, which is after every 210,000 blocks are mined (approx every 4 years). So after the first halving, miners were rewarded 25 BTC per block, right now it's 12.5 BTC , sometime in the middle of May this year it will be reduced again after the halving to 6.25 BTC per block.
Why Do This at all?
The idea is that over time, the amount of Bitcoins issued will decline and would therefore become more sparse as a whole. This would mean (given equal or increasing demand) that the price is going to rise. This is opposed to fiat currencies like USD or EUR which inflate over time as supply increases (more money gets printed), which would lead to a decrease in it's intrinsic value, thus pushing general prices higher (known as De-Basement by ).
That was a lot to take in, but now you've got an idea what's going on in the Bitcoin Block Chain world. -if we've explained it properly!
Let's move onto actually looking at the chart!
After reaching a new all time high of $30 in the middle of 2011, Bitcoin retraced back down to just a few dollars (losing ~90%) followed by an upward burst re-gaining about half of it's previous losses; this is where Bitcoin's first halving happened.
After this halving, as you can see, the price explodes upward gaining 9000% throughout 2013, stopping only momentarily on it's way to it's peak of $1150, before a long 2-year consolidation. (We shouldn't really call it a consolidation - it was a 2-year trading period with some amazing trades to be made - but that's a different article!)
During the aforementioned period we witnessed a low of $150 before a creep up to the second halving where it was trading at $650. This provides us with some interesting numbers, let's take a look at what we know so far...
Note - all figures have been rounded for clarity - the actual results would differ slightly but the idea and point being made would remain the same.
1st High - $30
1st Low - $3 (10% of high)
1st Halving - $12.50 (+300% from swing low AND about half of ATH )
2nd High - $1150 (+9000%)
2nd Low - $150 (13% of high)
2nd Halving - $650 (330% from swing low AND about half of ATH )
3rd High - $20000 (3000%)
3rd Low - $3000 (15% of high)
3rd Halving - $10,000 (half of ATH ) to $12,000 (+300% from swing low)
It's quite a statement - to get from where it is currently ($7000) up to $10,000 - $12,000 within 4 weeks seems completely un-reasonable, and yet, stranger things have happened in the crazy world of crypto!
So, that's our prediction for where Bitcoin will be in about 4 weeks from now (middle of May) when the 3rd Bitcoin Halving occurs - What do you think?
Onto our future predictions for Bitcoin going forward to the fourth halving event, this is a long way off so speculation based on extrapolation and past performance is all anyone has to work with. We're thinking if our prediction is correct for $12,000 in mid May 2020 there will have to be a period of consolidation following on shortly from the halving, possibly lasting anywhere from a few weeks to a few months, with the price lingering between $10,000 to $20,000.
Sometime in the last quarter of 2020 there will be an explosion upward, the one we've all been waiting for, the move that's widely predicted to reach highs of $100,000+. We don't disagree with this sentiment either, from a perspective the indications show exactly that; we're predicting highs of a little less than $100,000, maybe between $85,000 to $95,000.
We should say, although the "move" may begin sometime in 2020, it may not reach it's potential (or it's target ;)) until 2021, 2022 or even later!
This article should not be taken as trading advice per se, but as some guidance on what could happen if 2 things are true; the first one being that has a basis in trading successfully, and can indeed help to "predict" the future. The second being that history repeats itself, we all know the phrase and we're sure lots of people (including us) believe it to be generally true, let's find out in a few weeks, and again in a year or so!
The world of trading Crypto currencies can be dangerous, illogical, frustrating, un-predictable and very much profitable with the right knowledge and experience.
Good Luck & Happy Trading
Looking at this from another perspective you can find numerous occasions where Bitcoin is gaining heavily whilst the 500 is actually dropping. Have a look at Bitcoin in May 2019, jumping from roughly $5000 to $9000 (+70%), the S&P return was -6% or worse. Or even our "interesting" year of 2020, so far BTCUSD is currently running at about even with the start of the year, the S&P500 -13%; just a few weeks ago the correlation was even worse, BTC at -8% while the S&P500 returns were -22%!
The important point to be made is that the correlation does indeed appear strong in times of high volatility and drastic price movements, but looking longer term you can see that generally the two remain uncorrelated.