Is Bitcoin’s price gearing up for the halving?

Something slightly anomalous has happened to the price of Bitcoin in recent weeks. 

In fact, after touching the $27,000 mark for the first time this year in mid-March, it had actually lateralized around this threshold until mid-October. In other words, for more than seven months it had moved very little, with a de facto flat trend. 

Then suddenly on 23 October it jumped above $35,000, and since then it has been lateralizing around this mark. 

Practically all of a sudden it switched to lateralizing on a 30% higher quote. 

The reasons for Bitcoin price jump

It was a real jump, not least because the current share is in line with the share reached in early 2022 after the bursting of the speculative bubble in 2021. 

After touching $70,000 in early November two years ago, the price dropped to $33,000 in January last year, then rebounded to return to $48,000 in March but only to fall back to $37,000 in late April. 

Then there was the implosion of the Terra/Luna ecosystem crypto that sent it down to $28,000 in May, and then the failure of Celsius that sent it plummeting below $20,000 in June. The low was then touched in November a year ago at $15,500 with the FTX bankruptcy. 

Therefore, with the rebound at the beginning of the year, all the losses following June were recovered, while with the jump in October, those of May were also fully recovered. 

It is possible, therefore, that this was in fact only a recovery of the 2022 losses, but there is more to it than that. 

The caution

In fact, the Fear&Greed Index has risen quite high recently, to 72. 

Since 50 is parity, and 100 is absolute enthusiasm, elevation 72 means decided enthusiasm, but not yet excessive. 

Then again, trading volumes these days have also been high but not very high. 

Taking only Bitcoin trading volumes as a reference, since such comparisons for some altcoins still turn out to be very different, on the day of the upward break of the $36,000 wall there was no more than $38 billion in total trading, on the spot markets, compared with nearly $45 billion touched in October on the day the $32,000 wall was broken. 

If we then look at weekly volumes, those of the last few weeks have been almost half of what they were in March, when some US banks failed and the price of BTC fell to $20,000. 

These numbers seem to suggest rather clearly that there is no real FOMO on Bitcoin right now, while there certainly has been on some altcoins such as Sol from Solana or CRO from Crypto.com. 

All of this actually leads one to consider some caution necessary in judging these recent price movements, which can be interpreted precisely even merely as a recovery from all the big losses of the past year. 

Optimism about Bitcoin price

There is, however, much optimism circulating in the crypto markets. 

This is due in particular to two factors related to Bitcoin. 

The first, of course, is next year’s halving, while the second is the approval of spot Bitcoin ETFs in the US. 

Actually by now everyone, or almost everyone, knows that halving should happen at the end of April. And if it does not happen at the end of April it will certainly happen in March or May. 

Moreover, almost everyone almost takes for granted the approval of ETFs by the SEC, most likely by the first half of January. 

Often in such cases the markets tend to price such events before they occur, and then when they actually do occur they begin to unload. But despite this, optimism seems to linger. 

The next halving is approaching

The reason for such optimism is quickly stated: halving is approaching. 

Historically, there has always been a large speculative bubble the year following halving, in all three cases to date. 

This statistic has now entered well into the minds of many investors, and since halving is only five months away many are eagerly anticipating that event. Add to that the fact that spot Bitcoin ETFs could attract a lot of new capital, and the anticipation might seem justified. 

There is one statistic in particular that seems to make this optimism actually justified. 

In fact, it turns out that significant increases in the price of BTC have always been concentrated in a period ranging from six months before halving to 18 months after, excluding the initial two years of market presence (2010 and 2011). 

In fact, actually assuming being on this market only during the three periods between -6 months and +18 months since halving, and exiting during the rest of the time, a $5 investment would have yielded $130,000 to date, while pure buy-and-hold would have yielded “only” $37,000.

These are numbers known to all, and it is therefore possible that they led many nonamateur investors to enter six months before halving. 

Given that the halving is expected to take place in late April 2024, as far as is known, it may not be a coincidence at all that the turning point in Bitcoin’s price trend in this 2023 occurred at the very end of October, that is, exactly six months before the halving. 

Finally, however, it must be added that analyzing the past is no guarantee of being able to guess the future, because history does not necessarily have to repeat itself.