I originally wrote the following on my publish0x blog (link at the end). While this is a repost, I'm including some commentary to pack an extra punch!
Predictions and Trends: A Few Thoughts About the Halving
We have arrived. The 3rd halving has now begun! Hoorah!
Now what?
For a lot of people... a LOT of people, this is their first halving, and for many of those, this is their first year in cryptocurrency world. But, many are afraid to even ask what the big deal is about the halving, while others flood social media with predictions about the crazy things Bitcoin did, is doing, and is going to do. What's the truth? I'll make it really simple for you; nobody knows. But, for those who are still curious and don't want to stop talking, thinking, pondering the myriad of the halvening, I have a few interesting thoughts for you.
Follow with me on some halving history and the trends that I think are worth observing.
The first halving took place on November 28, 2012. Bitcoin went from around $12 market price to nearly $1000. This rise in value is nearly 8000% growth. WOW!
The second halving took place in 2016 on July 9. Bitcoin went from roughly $650 to nearly $20,000. This is a rise in value from nearly 3000%.
Again, WOW!
Especially in halving #2, a lot of people stood up and took notice of Bitcoin for the first time, as mainstream media (you know, that thing that no longer does any actual journalism and only plays the cards that bring them political gain) announced the monstrous $20,000 Bitcoin that had previously become a "thing" years ago when it was finally worth $1. A lot of people bought into the FOMO, and even started buying into all of the other new coins that were supposedly going to moon. Well, all of them did in their first few minutes when getting listed on exchanges, but we all soon learned that altseason wasn't a season at all; but an opportunity to start building the first plots to bury a lot of bags for hopeful future HODL's. Because irresponsible media only reported the spike, and because so many people were brand new to trading any kind of assets, let alone crypto, they simply didn't know how to look for any trends at all.
Here's the things to know now that halving #3 is underway.
The first halving took just over 1 year between the day of the reduction in block rewards, again from around $12 to an all time high (ATH) of nearly $1000.
The second halving took a little more than 1 year 5 months to reach its ATH peak, again from around $650 all the way up to almost $20,000.
Adding this to the data we have on the amount of growth, we can see that the first halving was around 8000% growth, with the second halving reaching nearly 3000% growth. Both of these are phenomenal for an asset to accomplish in 4 years; a total of almost 11,000% growth, I mean, WOW!
Breaking Down The Trends
This is the really important part I want to emphasize; the trends hold just as much data as the big exciting numbers.
From the price of Bitcoin at the day of the first halving to its peak value, it was just over 1 year, and the second time it was nearly 1 and 1/2 years. This means on trend, the first two times the halving took longer to peak.
Add this to the fact that the second time around, the increase in growth was less than half of that (imagine that, a halving within a halving?) on the first time, going from 8000% growth to 3000% growth.
There are numerous other factors to consider, but these are the main ones I would like to consider. One could say that if the halving itself affects price, for true economic reasons, then the trend is weakening over time. If it takes considerably longer for the same asset to reach new highs, and those highs represent significantly less growth than the first pattern, there is a weakening taking place.
My commentary serves as my analysis for the reasons behind the trend, more than scientific, it is partly instinctively driven. But, there is some science and data in there, as I have watched Bitcoin pretty much every day going on my 3rd year now, so I get used to crunching numbers that matter.
The halving event is a data point, and one could say a starting point to measure other trends. That 8000% growth #1, 3000% #2 can be measuring more than just ATH from halving to peak, but it is also likely that the movement within that same span of time included some deep lows that Bitcoin had to recover from. We could measure the lowest price Bitcoin dropped to after the halving, and measure the growth from that number instead of from the halving. That would give us two new data points; length of time from halving to lowest price after halving, and length of time from halving to lowest price after halving. From this, we could consider the impact that has on the actual % increase from lowest point to highest point after halving. But, for now, I'm just sticking a pin in it, because I want you to think of how these things relate to the 3rd halving now that it has arrived.
If we make some wide stretching assumptions about the 3rd halving based upon data from the first two, we can do the ridiculous thing of making an educated guess... also know as a prediction, about the end result of halving #3.
Let's take the 8000% growth and 3000% growth and shave it off to say that other factors, mass adoption, increased mining difficulty, improvements from layer-2 solutions all give us a reason to be slightly more optimistic than the 2nd trend. Let's also take the increase in time from 1 year to 1.5 years roughly, to achieve a new ATH. So, simplifying this greatly, let's pretend that the price of Bitcoin going into halving #3 was $10,000, which is where it was before whales pre-halving-dumped it down another $1K for the sole purpose of messing my math-lol.
Playing with numbers drastically, we could say that the 3rd halving would result in a 1500% increase from $10,000 in 2 years. That is certainly give-or-take 2-3 months of time with the flexibility of other conditions, not at all factoring in other data we're ignoring. That also gives around a $1500 wiggle room for the actual Bitcoin value the first weeks surrounding all 3 halving events. I can easily see this meaning a $140,000-$150,000 Bitcoin by 2022.
I am going to write a separate post specifically regarding the factors that affect each halving slightly differently, and those trends run much deeper. the truth is, there are factors that do not measure us in at all. When it all comes down, early adopter whales and Chinese miners specifically can drive the price more than anything else that naturally and economically occurs. But, it is fun to play with numbers and imagine what might happen to one's investment over time. This is one of many considerable trends to remember. If we see a $150,000 bitcoin in a couple of years, these numbers will speak extremely strong to the reason for that trend. If it is unbelievably disappointing or far surpasses this mark, we will learn a lot about the actual technology-driven experiment of this, and for any smart economist it would be a lesson in taking theory to the real world that they should long to study.
I hope you find this interesting, and for all intents and purposes, we celebrate the 3rd halving!
And now for some added thoughts regarding my original post above.
Trends are more telling than numbers alone. Numbers can be cleverly and often expertly manipulated to give us different understandings, expectations and outcomes. But, trends speak louder than all time highs, lows, averages, opens and closes. Numbers are not as hard-set in their rules as we think.
Add to this that Bitcoin and truly cryptocurrencies in all, are rarely ever reported without intent. We don't see a lot of mainstream media reporting digital assets for the movement they make or the meaning behind projects. News is reported during all time pumps and dumps and often as placeholders for banks and large investment rounds.
Keep your eyes on the trends and you will see the bigger picture.
Original post- attribute = ME found here.
...and for now, Crypto Gordon Freeman out.