In just 193 days, the world will witness the Bitcoin halving, an event that occurs roughly every four years (210,000 blocks) and halves the reward miners receive for new blocks. This inherent mechanism, which serves to regulate Bitcoin supply, has had a significant impact on the asset’s market price in the past, and historical patterns may indicate what happens next.
Unpacking The Bitcoin Halving Phases
Crypto analyst, Rekt Capital, provided a comprehensive breakdown today of the typical phases surrounding the Bitcoin halving events. Reflecting on historical patterns, he observed the pre-halving period as a time when Bitcoin might undergo a deeper retrace, suggesting this would likely occur over the next 140 days (highlighted in orange).
Drawing comparisons, he noted that “You can debate whether 2023 is more like 2015 or more like 2019 as much as you like. Doesn’t change the fact that BTC retraced -24% in 2015 and -38% in 2019 at this same point in the cycle (i.e. ~200 days before the halving).”
As the halving draws closer, roughly 60 days out (denoted in light blue), Rekt Capital indicated the emergence of a pre-halving rally. During this phase, investors typically “buy the hype”, attempting to capitalize on the anticipation.
However, this is followed by a retrace (dark blue circle) around the halving event. He cited the -38% dip in 2016 and the -20% decline in 2020, times when the market pondered over the halving’s bullish ramifications.
A multi-month re-accumulation often succeeds the pre-halving retrace. This period, according to Rekt Capital, has been characterized by investor fatigue, resulting from stagnation and underwhelming returns. Upon breaking out of the re-accumulation zone, BTC typically enters a parabolic uptrend (green), which heralds rapid price increases, often culminating in new all-time highs.
Potential Pressures On Bitcoin’s Price
While the approval of several Bitcoin spot ETF applications is in the focus of many investors as a bullish event, there are still some events that could trigger a crash in the Bitcoin price analogous to the previous halving timelines. Besides the strong macroeconomic headwinds, there are also several Bitcoin intrinsic dangers that hover over the market like a Damocles sword.
Tuur Demeester, Editor-in-chief at Adamant Research, voiced his concerns today, remarking, “I’m bracing myself for another shock in crypto. ETH is now breaking down, too. Bitcoin could sell off for a while amidst all this turmoil.” His comment was in response to yesterday’s research by Dylan LeClair who pointed to alleged financial maneuvers by Justin Sun, suggesting that “Sun is creating a web of deception in order to siphon USD liquidity out of crypto… He is a fraud.”
Further headwinds come from Miles Deutscher’s recent analysis. He hinted at significant supply pressures including the impending distribution of BTC and ETH by Celsius, FTX’s liquidation activities, the US Government’s planned sale of Silk Road-related BTC (~19,000 BTC has already been moved, with some sent to Coinbase for sale. About ~22,000 BTC will still be transferred this year), the much-discussed Mt. Gox BTC liquidations (postponed until October 31, 2024, but “repayments will be made in sequence as early as the end of this year”), and potential selling by miners due to escalating costs.
At press time, BTC was trading at $27,726 after bouncing north off key support at $27,370.
