A prediction regarding the price of Bitcoin is circulating these days that is rather optimistic.
However, before analyzing it, it is necessary to give it some context, otherwise it is difficult to understand why it should be regarded as particularly optimistic.
The price prediction based on Bitcoin’s cycles
Bitcoin has a fairly accurate and predictable cycle.
However, it is not a cycle related to price, or markets, but a technical one. It is in fact Bitcoin’s monetary policy cycle.
All of the world’s existing BTC (there are about 19.4 million of them) were created as a reward for miners.
Indeed, in the Bitcoin protocol, which is inviolable and immutable, it is written that initially 50 BTC created out of thin air were given away to anyone who managed to mine a block, and that this reward would be halved exactly every 210,000 blocks.
It also says in the protocol that roughly every 10 minutes a block must be mined, and thanks to the automatic change in difficulty it is more than 14 years that an average of just under 10 minutes passes between blocks.
By doing the calculations, it turns out that the reward halves every 4 years or so, and this is the true unchanging and predictable cycle of Bitcoin.
To date, the time between halving has been just over 3 years and 10 months, and by halving we mean precisely the cutting in half of the reward given to the miners.
Bitcoin’s monetary policy
Halving is Bitcoin’s only monetary policy measure.
Initially, 50 BTC, or about 7,200 BTC per day, were created and issued for each mined block, but from November 2012 they dropped to 25 per block (3,600 per day).
The second halving took place in July 2016, and brought the reward to 12.5 BTC per block (1,800 per day), whereas the last halving took place in May 2020 and brought it to the current 6.25 (900 per day).
The next halving will take place between April and May next year.
At this rate, no more new BTC will be created in approximately 2140, and neither will any Satoshi. A Satoshi is the smallest unit into which a Bitcoin can be divided on its blockchain, and it corresponds to one hundred millionth of a BTC.
The impact of miners on price
Nowadays, Bitcoin mining is an activity that requires the consumption of large amounts of electricity.
As the miners cash in BTC, they are in fact forced to sell much of it in order to buy electricity which must necessarily be paid for in fiat currency.
This means that when the reward given to miners is halved, the amount of BTC that miners can sell to finance their business is also significantly reduced.
In other words, the halving tends to have a negative impact on the supply of BTC in the market, such that if demand remains constant, the price can only go up.
However, it is worth noting that there is no certainty that demand for BTC can remain constant after a halving, or even increase.
Bitcoin: the price prediction for the next halving
In light of this, it is not surprising that there are many who believe that after next year’s halving, the price of Bitcoin may increase.
However, one should not forget neither that the current price is below $27,000, nor that the 2023 high stopped just above $31,000, and that not even the all-time high managed to break through the $70,000 wall.
The optimistic prediction was posted by crypto analyst TechDev on Twitter, and it speculates that the price of BTC could exceed $160,000.
To be fair, TechDev specifies that this is not an actual forecast, but a projection of Bitcoin’s price based on the historical interpretation of the price chart to date.
However, this projection is in line with the predictions of several other analysts regarding the parabola of Bitcoin’s price after the next halving.
$160,000 after the next halving
However, there is one thing that does not hold water in TechDev’s projection.
While the next halving will take place in April 2024 at the latest, TechDev’s projection shows instead reaching $160,000 as early as December this year.
Indeed, it considers the past period between peaks, and based on that history concludes to speculate that the next peak could occur in December 2023.
In reality, it seems rather difficult for the price of BTC to make new all-time highs before the next halving.
Moreover, in order to assume that such figures would be reached from current levels, it would be necessary to assume that a new speculative bubble would inflate between now and the end of the year.
The assumption of a bull run characterized by a real speculative bubble as early as 2023 is considered remote by many, although some believe it is possible because of the eventual collapse of the US dollar.
However, if one ignores the timing, the maximum peak shown by TechDev’s projection, within a range of $160,000 to $180,000, is very similar to that of other predictions, albeit post-halving.
The problem is that TechDev’s projection is based precisely on the timing, so ignoring the timing is effectively invalidating the projection.
The $100,000 level
While reaching $160,000 seems very optimistic, given the previous all-time high at $69,000, it would seem a little less optimistic if $100,000 is taken into account.
In fact, in 2021 many expected this level to be reached, but it did not arrive.
Thing is, in the first half of 2021 there was a very powerful first bull run that took the price of BTC from about $10,000 to $64,000.
Then there was a sharp correction, which brought it down to $30,000, which was primarily due to the Chinese ban on crypto mining and trading.
Coming off the bulk of Chinese capital in the crypto markets, the second bullrun of 2021 failed to bring Bitcoin’s price above $70,000, and $100,000 was not even approached.
Now, however, starting in June, Chinese capital may begin to return to the crypto markets, as Hong Kong has decided to allow registered crypto exchanges to operate lawfully again.
Moreover, in the previous two post-bubble bear-markets, Bitcoin’s price had always fallen 85% from its highs, while in 2022 this was not the case.
If we consider the $15,500 touched in November 2022 as the bottom of the third post-bubble bear-market, curiously enough we find that to make an -85% from the all-time high this would have had to be precisely at the $100,000 mark.
Hence it is not at all absurd to imagine that $100,000 in 2021 was in the air, and did not come just because of the lack of Chinese capital. And with the return of Chinese capital, even the $160,000 post-halving level does not seem so absurd.
Nonetheless, it is still overly optimistic to consider it an attainable level by the end of the year.