What should we expect to see happen around Bitcoin's next halving event?

Bitcoin is set to see it's next halving event on May 12th, which is roughly 8 days away from today.

It's coming quickly and I have seen a lot of people talking about what could happen around that time in terms of price action.

Are we going to see a pump, a dump, or just a big pile of nothing?

In order to get some kind of guess we should look to see what happened in the past...

I dug up a chart showing the returns on bitcoin 6 months out following the last halving event, which took place in July of 2016.

As you can see, it was quite bullish for the price:

(Source: https://twitter.com/CryptoCompare/status/1255855905318604802/photo/1)

Following the last bitcoin halving, bitcoin saw returns of 38% in the 6 months following the halving.

Nothing to sneeze at, however, if we really dig into those numbers it gets even more interesting...

2016 Post Halving Numbers...

One thing that stands out to me looking at the chart posted above, is what happened immediately following the halving...

Immediately following the halving, we saw a rather substantial dip.

Prices dropped from a little under $700 all the way down to a shade over $500 within the first month after the halving.

That represents a drop of about 25%.

Not only that, but also looking at the above chart, we see that prices ran all the up to almost $1,200 before pulling back substantially right at the end there to end the 6 month window with those 38% gains.

Given that information, it actually makes those 38% gains look rather paltry...

Had you bought that initial dip, and gotten bitcoin somewhere in the low $500's, you could have easily realized a heck of a lot more than that 38% gain over that 6 month stretch...

If you somehow managed to get the top there, you would be looking at gains of close to 120%!

It is darn near impossible to time things perfectly like I am suggesting here, but the point is that the 38% number is nice, but it actually could have been a lot bigger for some astute traders.

And again, we are just talking about the first 6 months post halving, the next 6 months returned significantly higher returns...

Ok, so the last halving was wildly bullish for the price, what about this time?

That is the 64 thousand dollar question.

The bitcoin market is very different now than it was back then. It's much more known about, already worth significantly more, and there are robust futures/options markets that allow miners to hedge in a way that was not possible previously.

Add all that up and it may throw previous patterns out the window.

That being said, I still believe the supply/demand economics will still work in a positive way on prices in the medium to longer term regardless of everything mentioned above. If demand stays roughly the same but new supply decreases, we would see prices going higher.

If demand were to increase, say because prices are going up and people don't want to miss out on the next big run, well then you see crazy things happen like where bitcoin went from $1k to $20k in about 6 months time after the last halving.

I think that right there is exactly how and why these cycles happen and are so predictable.

At our current time, bitcoin is at an inflection point:

(Source: https://twitter.com/CryptoCompare)

Given the fact that it has already run up significantly in the preceding weeks, and is at the top of this channel heading into the halving, I would not be surprised to see a major dip after the halving yet again.

Very similar to what we saw in 2016.

I don't think it will trade all the way down to the bottom of this channel, but something in the realm of a 25-30% drop again seems highly possible and would take prices to about the midpoint of the above channel.

Something in say the $5k-$7k range.

That being said, like in 2016, I think we are ultimately going to see a massive rally start from that dip. A rally that takes prices well beyond previous highs.

I don't want to speculate on how high it might go, but the previous halving saw prices go 20x the previous highs in about a year post halving. A similar move would take bitcoin to $400k by May of 2021.

I am not counting on that happening this time around, but I would not be surprised to see $100k hit at some point before the end of 2021.

It's a nice big round number and seems well within striking distance based on past halving patterns.

Stay informed my friends.

-Doc