Bitcoin Fundamentals: Halving Event (revisited)

On May 17, 2016 I published a take on the only real fundamentals to speak of with Bitcoin which is the relationship to supply in terms of mining returns. You can read that here. Since the recent bubble and subsequent blowoff I have remained as always a long term perma-bull but short term bear. The joke meme in trading and finance is "this time it's different." The reason it's funny is because it is never different. Having seen several Bitcoin bubbles and busts play out I can say with just as much confidence this one is behaving in the same way just with higher valuation. In the end trading is all about pattern recognition and this course remains my best guess.

Back in 2016 I noted: "It is also possible that two bubbles will occur; the first perhaps occurring in the first quarter, the second occurring in the second, with the final quarters consolidating to the mean" I put no prices or set dates within this forecast because there is no way that I could be accurate enough to seem prescient. However, it does seem in retrospect that the framework of my fundamental analysis held true. The view I chose in this chart is logarithmic so that it encapsulates the last 6 years in visually useful form. The source for the reward eras is here.

Leading up to the 2012 halving event to Reward Era 2 there was a run up in price before the event and then price consolidating around it. The same happened for the 2016 event that marked Reward Era 3. Midway through Reward Era 2.1 was a large movement to the upside in price. Reward Era 3.1 also saw a more sustained up move with the greatest acceleration in the last part. The "Big One" occurred during Reward Era 3.2. The last one we thought was big was Reward Era 2.2. So at the very least now we can say confidently that the largest moves both occurred during the same reward era quarters.

What then can we say going forward? We are currently in Reward Era 3.3 so our best forecast would be to look at Reward Era 2.3. That quarter was marked by a significant decrease in valuation along with consolidation. Reward Era 2.3 ended down overall. So if we take this fundamental analysis as reliable we can extrapolate that the current Reward Era we are in will likewise be bearish, consolidate, and end down. We would need to wait until a few weeks within reward era 3.4 to begin buying. The average duration of quarters is around 48 weeks which puts 3.4 around April 2019. Observing the behavior of price during 3.3 and 3.4 will allow us to see if it follows the same pattern leading up to the Halving Event which is forecasted as of writing to be May 23rd 2020.

Comment:

So now that we have had a significant bearish move it is interesting to look forward on this chart (press the arrow on the right) and see that this halving event quarter is looking very similar to it analogous past.