I originally wrote the following on my publish0x blog (link at the end). While this is a repost, I've added commentary at the end.
In my previous post regarding the Bitcoin Halving, also known as the "Halvening", I broke down the history of the first two halving events and the effect they had on price action for Bitcoin. I shared observations that I consider important trends people might learn from.
In this post, I want to talk about one unique metric you may find interesting. This deals specifically with the part most people forget about; the value of Bitcoin after it's all time high, or ATH.
In 2012, we essentially had a $12 Bitcoin going into the halving event. This value rose to nearly $1000; quite the treat for the earliest adopters who believed in HODL'ing despite the fact they had seen Bitcoin at less than 1 penny, and rejoiced when it was first worth $1. To see this literally 1000% for $1 to $1000 had to be incredibly exciting! So, $12 to $1000 took just over 1 year, and this shows significant trend return for the person that attributes at least some of Bitcoin's growth to the devaluation of mining fees at pre-determined blocks of data.
In 2016, we saw an approximately $650 Bitcoin rise to a glorious almost $20,000 ATH. This took a bit longer, at around 1 year 5 months. Just imagine for a moment, even for the non-miners, if you were fortunate enough to few $100 of Bitcoin at $1, and sell near the top. WOW!
Again, I say "WOW"!
Here is the new piece of data I would like for you to consider:
After the first major ATH following the first halving event, Bitcoin did drop in price from nearly $1000 down to $650 at the time of the second halving. This doesn't speak to its volatility in between. If I'm doing my math right, and there's a very good chance I'm not firing all pistons to stick with me here-lol... we saw a 35% drop from Halving #1, to ATH, to Halving #2 starting point, going from $12 to $1000 to $650. A 35% drop is significant for anyone studying price trends no matter how fond of an asset. But, it's not necessarily bad news either. The mere fact that in a 4 year window, people saw a value in Bitcoin at $12, $650, and $1000 is amazing.
It took months for Bitcoin to rise back up to it's previous ATH, from $650 to $1000, and this time it didn't stop until it was an almost 20X, coming to roughly 3000% of it's value at the time of the halving. All of this is particularly of interest when speculating on the future price of Bitcoin.
When Bitcoin was mere pennies, the idea of people seeing such an incredible value in a technological special interest project... pseudo acting as money, pseudo acting as a store of value, and partly representing a fun computer experiment, it would be hard to imagine people spending hundreds for a single imaginary coin, let alone thousands.
Going into the 3rd halving Bitcoin had kissed $10,000 2-3 times before falling to $8500. To look at scale, we have 3 halving start points;
$12, $650, and $8500. Again, WOW!
Here's where that metric I keep talking about comes in. We saw Bitcoin fall from the previous ATH of $20,000, to just under half of that value.
The first time we saw a 35% drop. The second time we saw a roughly 65% drop from the ATH to the halving start-point, down from $20,000 to $8500 give or take.
Putting all of these things together, and looking at the trends I estimated in the previous article, Bitcoin takes a time and 1/2 to reach new ATH each halving, loses more than 1/2 of its percentage of growth to all time high, and starts at an increasingly lower value going into each halving cycle, from 35% to 65%.
The good news, is that the next major trend we're looking at in the fairly long term, is the next high. I can't imagine that, if Bitcoin hits $80,000, $100,000, $150,000, that it won't take a great amount of correction before we land at the next halving, which will be even more pivotal than this one.
World events could crush its value, or despite pandemics and depressions of economy, we may see Bitcoin do exactly what it's always done, which is to defy logic and exceed expectations of its critics.
Keep your eyes on the prize, and never stop learning. Go. Bitcoin. Go.
And now for a few extra thoughts.
Trends give us more details than just numbers; they speak to timing, picking up momentum and losing it in pace over time. These things are often effective in improving one's trading abilities at market, but just as important to plan long term strategy for investing and HODL'ing. The truth is, that there isn't a soul on the face of the planet who knows what Bitcoin will be worth in 2 years. It could be wiped from existence with legislation, and it could be released from the crippling grip of fiat and soar to the moon. Who knows? But, gauging the trends means being able to watch for highs, lows and averages day on day, weeks and months to follow.
Original post- attribute = ME found here.
...and for now, Crypto Gordon Freeman out.