Cyclicality of the cryptocurrency market: halving

Participants of the cryptocurrency market, who came to it for a long time, know that there is a certain cyclicality of the market, when the growth in the value of crypto assets is replaced by their decline. The regularity of this process can be observed through the analysis of various factors that affect cryptocurrency processes. In the first part, we will consider such a phenomenon as halving.

Cyclical changes in the value of Bitcoin and halving

The Bitcoin protocol has a process called halving(halving is a halving). Halving implies a regular halving of the fee to miners for calculating the hash (code) of one block. Since 2009, with the advent of Bitcoin, miners have received a reward for each calculated block in the amount of 50 BTC. Since 2012, the size of their reward has been halved and amounted to 25 BTC for each calculated block. In 2016, there was another halving, and miners began to receive 12.5 BTC for the calculation of one block. The last reduction in the miners’ premium occurred in 2020 and dropped to 6.25 BTC per block. This process of halving the miners’ rewards will occur every 4 years and will continue until 2140, when the last 21 millionth Bitcoin will be mined.

A total of 32 halvings will be produced until 2140. After the last halving in 2133, the miners’ reward will be 0.00000001 Bitcoins or 1 satoshi for each block mined.

In three years, in 2025, 95% of the maximum possible circulation of Bitcoins in the amount of 21 million BTC will be mined. And by 2034, 99% of all Bitcoins will be mined.

According to analysts, in 2133, the production of one block of Bitcoin will require a thousand times more electricity than today. This increase in the required capacity must be multiplied by inflation during this time.

On the one hand, currently more than half of the energy that is spent on bitcoin mining comes from renewable sources. Also, the capacity of chips necessary for cryptocurrency mining is constantly growing. These factors may slow down the growth of Bitcoin mining costs in the future.

On the other hand, the complexity of Bitcoin mining will increase by orders of magnitude.

The calculations of analysts taking into account all these factors tell us that the cost of mining one Bitcoin in 2133 will be $ 32 million at today’s prices.

If we take into account the inflation of the dollar itself, which over the past 100 years has lost 92% of its value, then with the most optimistic forecast (which includes the loss of 50% of its value by the dollar in the next 100 years), the cost of one Bitcoin in 2133 will be 1.6 billion US dollars.

Consider how the value of Bitcoin changed between the past halvings of 2012, 2016 and 2020.

The cost of Bitcoin from 2009 to 2012

Initially Since the advent of Bitcoin in January 2009, its value has long been below $ 1. In mid-2011, there was a sharp increase in the value of Bitcoin to $ 30. At this time, the first cryptocurrency began to gain popularity among users, as well as among the shadow business associated with the sale of drugs, weapons, etc. After the surge in price, Bitcoin fell to $ 2.2, and by the first halving in November 2022 came with a price of $ 12.25.

Thus, in this first period before the first halving, Bitcoin rapidly grew 30 times (we take $ 1 as the initial price) or by 2900%, then lost 93% of its value, and grew from the local minimum by 5.5 times or 450%. By the end of this period, Bitcoin was trading 60% below its maximum value.

The cost of Bitcoin from 2012 to 2016

By December 2013, Bitcoin had risen sharply and its value exceeded $1,100. Then the first cryptocurrency fell to below $ 200, and by July 2016 was worth $ 650.

Thus, Bitcoin in this period first grew 90 times or 890%, then lost 82% of its value, and by the next halving came 40% cheaper than the peak mark.

The cost of Bitcoin from 2016 to 2020

Here, the nature of the change in the value of Bitcoin repeated the first two periods. In December 2017, Bitcoin reaches almost $ 20,000, after which it drops to $ 3,000, and by May 2020 it comes with a price of $ 9,000.

The first cryptocurrency grew from 2016 to 2017 by 30 times, or by 2900%, then there was a drop of 85%, and the value of Bitcoin at the time of the next halving was 55% below the maximum price.

One hundredBitcoin from 2020 to the present time

In the current period, Bitcoin has drawn two tops. The first was achieved in April 2021, when the value of Bitcoin reached $ 63,000, and the second was conquered in November 2021 at around $ 67,789. At the moment, the first cryptocurrency is trading at $ 29,000.

Bitcoin has grown 7.5 times or 650%, and to date is losing 57% of its maximum.

Halving and Bitcoin Price Movement Forecast

Based on the statistics of past periods, a predictive model of the value of Bitcoin was created. According to of this model the price of Bitcoin will drop to $ 14,000 in November of this year, halving in April 2024 will approach the level of $ 39,000, and after the next halving it will reach a maximum at around $ 291,500 in October 2025.

Author: Elvir, Analyst Freedman Club Crypto News