Bitcoin: optimism for the effect of halving on the price

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In April, the fourth Bitcoin halving will occur, and there is already some optimism about the effect it could have on the price. 

The point is that during 2022 the price of BTC has dropped from around $47,000 to around $16,000, but in this 2023 it has not yet fully recovered the losses. 

Despite a +164% increase since the beginning of the year, it still seems possible for a further rise, from $44,000 to around $48,000, to fully recover the losses of 2022. 

If it were to happen, the last two years would have been perfectly symmetrical, something that has never happened in the past. 

The impact of past halvings on the price of Bitcoin

The one in 2022 was the third post-halving bear market in Bitcoin’s history. 

In both previous cases, it took about two years to recover all the losses from the bear market, which, however, lasted only one year in both cases. 

After the first halving, in 2012, there was an incredible speculative bubble in the following year (2013), followed by a heavy bear market in 2014, which ended in January 2015. The subsequent recovery ended in January 2017, exactly two years later. 

After the second halving, in 2016, history repeated itself, with a speculative bubble the following year and a heavy bear market in 2018. The complete recovery of losses came at the end of 2020, approximately two years after the bottom. 

Even after the 2020 halving, a speculative bubble has inflated, but with some differences. First of all, it was much more contained, to the point that many don’t even consider it a bubble. Furthermore, it started inflating in advance, already at the end of 2020 itself and not the following year. 

In fact, the bulk of that bull run Bitcoin happened in the first four months of 2021, and not in the second half of the year as it did in 2013 or 2017.

The bear market of 2022 was also different, because although it had very similar timing to the previous two, it was characterized by a lower percentage loss. 

At this point, it is reasonable to consider the hypothesis that 2023 could also be different from 2015 and 2019, so much so that from September to now, the trend of the Bitcoin price seems more similar to that of late 2016 or late 2020. 

The April halving

At this point, it almost seems like the markets expect that, unlike previous cycles, the recovery following the bear market will happen in just one year, and not in two, that is, before the halving.

For this reason, it is even possible that they are already discounting the halving itself on the BTC price, since it is discounted to occur around April.

Furthermore, there are two other potentially bullish events that should happen in the meantime. 

The first is the approval of Bitcoin spot ETFs in the USA, which is expected to happen in early January.

The second is the beginning of interest rate cuts in the USA, which could happen in March. 

All of this is adding up and thus contributing to the spread of a certain optimism. 

The analysts’ thoughts

According to XTB’s Chief Market Analyst, Walid Koudmani, there is a growing optimism in the crypto markets.

Koudmani reiterates that the first half of 2024 is shaping up to be an extremely exciting period for Bitcoin and the crypto markets, and that the market is expecting a new bull run.

However, it also highlights some doubts. 

The first one concerns the impact of ETFs on the price of Bitcoin, because some believe that it could be similar to what happened with gold about twenty years ago, but there are some differences. 

For example, when BTC futures were launched on the Chicago Stock Exchange in December 2017, there were profit-taking actions that caused the price to drop in the short term. 

At the same time, however, the potential success of Bitcoin spot ETFs would force their managers to buy BTC on the market, causing its price to rise. However, in Europe this possibility has already existed for some time, but it has not yet generated much interest.

Another doubt lies in the fact that Bitcoin has only 15 years of history, and as for the halvings, there are only three past events to analyze and compare. 

All of this is compounded by external factors, such as a possible economic recession or a second wave of inflation, although these cases do not seem likely at the moment. 

All of this also opens up opportunities to realize the profits already obtained so far, although on-chain data instead suggests that, for the time being, many investors are instead preparing for the continuation of the trend.

In other words, although everything suggests a possible continuation of the trend of the last few months, it should not be taken for granted at all because there are still too many uncertainties and things that could go wrong.