The Bitcoin halving, a pivotal event in the cryptocurrency's timeline, is an inbuilt deflationary feature that occurs approximately every four years. This event slashes the Bitcoin reward given to miners for validating a block by half, ensuring a limited supply and thereby protecting Bitcoin's value by increasing its scarcity. The next halving is due in 2024, expected in April or May.
Past Halving Events
The Bitcoin halving has happened three times, first in 2012, then in 2016, and recently in 2020. After each halving, Bitcoin's price has surged significantly. For instance, after the most recent 2020 halving, Bitcoin's price rocketed from about $9,000 to a high of $68,789 by May 2022, translating to over a 660% increase. It's crucial to note, however, that while the long-term trend has been positive, Bitcoin's price is volatile and can fluctuate significantly in the short term.
The $200,000 Target
The fundamentals of this bull case are simple, we are grounded in the deflationary concept that the halving will limit Bitcoin's supply, stimulating an increase in demand and price. Furthermore, the halving could trigger a FOMO (fear of missing out) sentiment among investors, inflating the price further than the projected price.
For a more concrete speculation, we can estimate Bitcoin's future price based on the diminishing growth rate observed after each halving event. Historically, the growth rate tends to decrease with each cycle, likely due to the maturing market and larger initial price before each halving.
After the first halving in 2012, the price increased by over 9,000%. In the second cycle, after the 2016 halving, the price surge was about 2,800%. And following the 2020 halving, we saw a growth of around 660%.
Notice that the percentage growth decreases each time. If we examine the ratio of decrease between the cycles, from 9,000% to 2,800%, there was roughly a 69% decrease in growth. Then from 2,800% to 660%, the decrease was approximately 76%. Taking an average of these two ratios, we might anticipate a further 73% decrease in growth after the 2024 halving.
Thus, if we apply this 73% decrease to the previous cycle's growth of 660%, we get an estimated growth rate of around 178% for the upcoming cycle. Given the price at the last peak was about $68,789 (May 2022), a 178% increase would put Bitcoin at a hypothetical price point of around $191,232 post-2024 halving. If the current price is roughly $30,000, this target represents a 530% potential upside.
However, it's crucial to stress that this prediction is purely speculative and our bull case. The volatile and unpredictable nature of the Bitcoin market, along with numerous other factors (regulation, adoption, Bitcoin ETFs, FedNow, etc.) could impact the price beyond the halving mechanism, making accurate predictions challenging.
FedNow Fed Crypto
The Federal Reserve is developing a new instant payments system called the FedNow Service. Slated for late 2023, this service could potentially make Bitcoin less attractive as a payment method by offering similar capabilities. Furthermore, it may also increase the volatility of Bitcoin prices by making it easier for people to buy and sell Bitcoin. It's still early days, but Bitcoin users should certainly keep an eye on the development of FedNow.
Impact on the Mining Industry
The Bitcoin halving will substantially affect the mining industry. As the reward for mining Bitcoin halves, profitability may decline, causing some miners to exit the industry. On the flip side, miners may need to invest in more potent mining equipment to stay profitable. This situation could result in a more centralized mining industry, where only the most efficient miners can remain profitable, thus hindering new miners' entrance and concentrating power among existing mining companies like MARA, RIOT, and BITF.
The Bitcoin halving event promises a substantial impact on Bitcoin's price, security, and the broader cryptocurrency market. However, the advent of the FedNow Service, aiming to provide instant payment services, may pose intriguing challenges or opportunities for Bitcoin. As we draw closer to the halving, it's essential to keep track of Bitcoin's price trajectory and understand this event's potential implications. As we navigate this path, one thing is clear; the crypto universe is about to get ever more interesting.