Bitcoin halving is an event that halves the rate at which new Bitcoins are introduced to a network (or mined). This event occurs approximately every four years or after 210,000 blocks have been mined; as a result, each halving reduces the reward given to miners by half and mimics a concept known as the hardening of a currency (meaning it is harder to extract it over time, like gold, for example). Considering one such event is approaching in the next two months, we would like to look at past halving periods. The first halving occurred on 28th November 2012, when the block reward was cut from 50 BTC to 25 BTC. Interestingly, Bitcoin gained about 27% from its lows on 27th October 2012 until one day before the first halving; in the next 30 days after halving, it gained another 10%. In the 90 days after the event, Bitcoin rose nearly 159%; one year after the first halving, Bitcoin was up an astounding 8,334%.
Illustration 1.01
Illustration 1.01 shows Bitcoin in 2012 and early 2013. The yellow arrow indicates the date of the first halving.
About 30 days before the second halving, Bitcoin was on a similar upside trajectory as during the first halving cycle, gaining approximately 14% (though the run-up was slightly more than 34% at some point). However, in the next 24 days after the second halving, Bitcoin lost nearly one-third of its value before rebounding; 30 days after the second halving, it was down only about 5% (measured from the opening price on the day of the second halving). In the 90 days after the event, Bitcoin was down almost 8% (which coincides with the time it started to reverse to the upside). In one year after the second halving, Bitcoin was up 284%.
Illustration 1.02
The image above illustrates BTCUSD on the daily time frame in 2016. The yellow arrow indicates the date of the second halving when the block reward was reduced to 12.5 BTC.
The third Bitcoin halving took place on 11th May 2020. It was preceded by a massive (and rapid) selloff in stock and cryptocurrency markets due to the start of the coronavirus pandemic earlier that year. From a peak on 20th February 2020 until a low on 13th March 2020, Bitcoin dropped more than 63% (in less than 30 days). From its lows in March, Bitcoin soared by 126% until the day of halving (yet it was still lower than at its peak in February). Bitcoin’s performance in the 30 days after the third halving was about 9%, and in the 90 days after the event, it was about 40%; one year after the halving, Bitcoin was up 565%.
Illustration 1.03
Illustration 1.03 displays the daily chart of BTCUSD. The yellow arrow indicates the third Bitcoin halving in 2020 when the block reward was reduced to 6.25 BTC.
Technical analysis gauge
Daily time frame = Bullish (losing momentum)
Weekly time frame = Neutral
*The gauge does not necessarily indicate where the market will head. Instead, it reflects the constellation of multiple indicators.
Please feel free to express your ideas and thoughts in the comment section.
DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not serve as a basis for taking any trade action by an individual investor or any other entity. Your own due diligence is highly advised before entering a trade.
Illustration 1.01
About 30 days before the second halving, Bitcoin was on a similar upside trajectory as during the first halving cycle, gaining approximately 14% (though the run-up was slightly more than 34% at some point). However, in the next 24 days after the second halving, Bitcoin lost nearly one-third of its value before rebounding; 30 days after the second halving, it was down only about 5% (measured from the opening price on the day of the second halving). In the 90 days after the event, Bitcoin was down almost 8% (which coincides with the time it started to reverse to the upside). In one year after the second halving, Bitcoin was up 284%.
Illustration 1.02
The third Bitcoin halving took place on 11th May 2020. It was preceded by a massive (and rapid) selloff in stock and cryptocurrency markets due to the start of the coronavirus pandemic earlier that year. From a peak on 20th February 2020 until a low on 13th March 2020, Bitcoin dropped more than 63% (in less than 30 days). From its lows in March, Bitcoin soared by 126% until the day of halving (yet it was still lower than at its peak in February). Bitcoin’s performance in the 30 days after the third halving was about 9%, and in the 90 days after the event, it was about 40%; one year after the halving, Bitcoin was up 565%.
Illustration 1.03
Technical analysis gauge
Daily time frame = Bullish (losing momentum)
Weekly time frame = Neutral
*The gauge does not necessarily indicate where the market will head. Instead, it reflects the constellation of multiple indicators.
Please feel free to express your ideas and thoughts in the comment section.
DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not serve as a basis for taking any trade action by an individual investor or any other entity. Your own due diligence is highly advised before entering a trade.
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