In a little more than a year, there will be another Bitcoin halving, which will result in a halving of the BTC reward distributed to network validators for each block produced. This could be a major theme in the Bitcoin market in the ensuing quarters. This is due to the significant pricing impact that previous halves have routinely had.
By comparison, the current Bitcoin block reward is about 6.25 BTC, and blocks take about 10 minutes on average to mine. This block reward will be reduced to 3.125 BTC in April 2024, reducing the inflation rate of Bitcoin from about 2.0% to about 1.0%. The goal of Bitcoin's inflation rate is to eventually zero out, ensuring that there will never be more than 21 million BTC available.
Routine Halvings Lead to a Horrendous Rally
The first Bitcoin halving occurred in November 2012, the second occurred in July 2016, and the most recent one occurred in April 2020. All three have followed sharp increases in the price of bitcoin. When the 2012 halving occurred, Bitcoin was worth about $12. It had risen above $1,000 in about a year.
The second halving happened when the cost of one bitcoin was about $650. Bitcoin's price hit $19,000 in less than a year and a half. Eventually, the 2020 halving occurred when the price of Bitcoin was less than $9,000 in that year. Then, prices continued to rise, reaching $69,000 record highs in November 2021.
So, Bitcoin has seen gains of about 83x, 29x, and 8x from the halving date to the following market top. Predictably, the pace of Bitcoin's post-halving gains has slowed and may potentially drop more as the asset class matures and the currency experiences significant expansion in market capitalization.
When considering Bitcoin's top price during the post-2024 halving timeframe, perhaps the 2024 halving could lead to a more modest 2-3x increase. A continued gradual recovery in 2023 and into 2024 might well be in the cards, despite ongoing macro/liquidity headwinds from the Fed's tightening efforts, as a litany of on-chain and technical indicators all proclaim that 2022's bear market is over and 2023 is off to a good start for the world's largest cryptocurrency by market capitalization.
Let's assume that Bitcoin is able to reach the $30–40K range before the next halving. Then, it's possible that a post-halving rally to the north of $100,000 will occur.
Several Models Indicate Bitcoin's Long-Term Upside
Compared to the aforementioned back of the fag box research, a number of widely used long-term Bitcoin pricing models and forecasting tools are far more bullish on the cryptocurrency. Bitcoin's fair price right now is around $55,000 and could increase to above $500K in the following post-halving market cycle, according to the widely used stock-to-flow, which displays an estimated price level based on the number of BTC available in the market relative to the amount being mined each year. That represents gains of over 20x above current prices.
At present prices, Bitcoin is in the "BUY!" zone, having recently recouped from the "Basically a Fire Sale" zone in late 2022, according to Blockchaincenter.net's well-known Bitcoin Rainbow Chart. In other words, the model predicts that Bitcoin is gradually making up for its significant oversold condition. Bitcoin was able to enter the "Sell. Really, SELL!" zone during its most recent bull run. The model predicts that Bitcoin might trade in the $200-$300K range if it can accomplish this feat in the following post-halving market cycle, which is predicted to occur within one to one and a half years of the subsequent halving. It represents gains of 8–13 times over current levels.