Bitcoin is rallying nicely pre-halving, but the biggest gains are likely to come post halving
Bitcoin starting off the year up 40% is a nice start to the year, but the really big gains might not be coming until later...
We don't have a ton of data to go off of, but from the data that we do have, the trend is clearly that the largest moves in bitcoin happen during the moths following the halving.
Looking back at the previous two halvings, this was very much the case:
(Source: https://medium.com/swlh/bitcoin-halving-everything-you-need-to-know-4573dc5b528e)
What kinds of returns are we talking about here?
Halving returns from 1st and 2nd halving:
Pre-Halving 1: 660%
Post-Halving 1: 3400%
Pre-Halving 2: 380%
Post-Halving 2: 4080%
*These numbers are not exact as I did some rounding and the exact tops/bottoms vary by the exchange you use, but you can see the trend
During the first halving we saw returns 5x those prior to the halving.
During the second halving we returns 10x those prior to the halving.
It's tough to glean too much of a trend here other than the largest returns tend to come after the halving.
Why is that?
Most likely it is due to the supply/demand economics.
Bitcoin's price is all based on supply/demand...
In order for a price to stay flat, the current demand coming in must roughly offset the new supply coming out.
Due to this new supply coming out there must also always be new demand coming in, otherwise prices would continually go down.
If the demand/supply is roughly flat, and then the new supply rate is suddenly cut in half, we are going to rising prices as long as that demand just stays constant (or even if it just doesn't decrease by as much as the new supply rate).
I think it takes a few months for this this supply/demand change to really be felt in the markets, but once it is, the price starts going up.
When the price starts going up, traders and speculators jump in helping to drive it even higher.
The end result is a price that ends up way overshooting where it probably should have gone due to a massive influx of demand.
This phenomenon is exactly why I think we see these 4 year market cycles in bitcoin and why it all revolves around the halving.
And the biggest gains are seen when this supply/demand imbalance is actually felt in the markets.
Stay informed my friends.
-Doc