When Bitcoin was first introduced, it had little to no value. Early adopters exchanged thousands of Bitcoin for just a few dollars, until the infamous Pizza Day incident when Laszlo Hanyecz paid 10,000 BTC for two large pizzas started a series of events that resulted in Bitcoin’s worth of rose a few cents to nearly $ 60,000 in just over a decade.
Bitcoin has come a long way since then. Large corporate institutions have denied their value as an investable good for years, only to turn around and invest in it themselves. Recently, PayPal introduced Bitcoin as a payment method for millions of merchants who use its platform. Celebrities like Paris Hilton have joined the community and Bitcoin seems poised for even more growth.
By analyzing Bitcoin’s past performance, it is not impossible to get an idea of where its value should go next. While many analysts and influencers alike have made bold predictions – like Bitcoin’s growth to as high as $ 1 million – I thought it best to take a look at ourselves by analyzing each halving epoch, i.e. the Bitcoin’s performance between each halving event.
The following table examines the value of Bitcoin over the past 11 years in four separate sections called the Halving Epochs:
The diagram was inspired by a similar diagram that I came across recently. It was missing all the projections I thought necessary to predict where Bitcoin is going next. As mentioned in the table, each epoch is 20 times larger than the previous one and covers the times between each halving event. When analyzing and comparing each epoch, there is a clear trend.
Epoch 1: Genesis Block (2009-01-03) to the first halving (2012-11-28)
In the first epoch, Bitcoin found its booth after it was first published by Satoshi Nakamoto in 2009. It was several months before early adopters got on board and a dollar-based value was calculated, with Laszlo Hanyecz’s 10,000 BTC pizzas setting the price. During that time, Bitcoin’s value rose from $ 0.00 to $ 29.02, with early usage limited to trading through forums and early, limited exchanges.
Epoch 2: first halving (28.11.2012) to second halving (09.07.2016)
In the second epoch, Bitcoin began to gain further acceptance. Although the notorious mountain. Gox Exchange was founded back in 2010 and had seen some controversy with multiple hacks in 2011. By 2013 and early 2014, up to 70 percent of all bitcoin transactions were being processed before the infamous hack that shut the company down and seeing bitcoin see a huge drop in value as thousands of bitcoins were stolen. Then there was the infamous Silk Road and Silk Road 2.0 platforms, which led the media to associate Bitcoin with illegal activity. In the second epoch, Bitcoin’s value traded for just $ 12.33 to a high of $ 1,134.93.
Epoch 3: Third Halving (2016-07-09) to Fourth Halving (2020-05-11)
By the third epoch, Bitcoin had taken its acceptance to new highs. The world’s largest investors and institutions finally took notice, and many changed their minds about Bitcoin as a decent asset and store of value. Bitcoin’s run from a low of $ 526.98 to its famous high of $ 19,640.51 in late 2017 has been widely reported, as has the subsequent decline in value. Although it became clear that Bitcoin trading was volatile, money managers and the average Joe took note of Bitcoin as an asset.
Era 4: fourth halving (2020-05-11) to fifth halving (second half of 2024)
We are currently in the fourth epoch. Public companies like MicroStrategy and Tesla have added Bitcoin to their balance sheets, making new highs almost monthly, and reputable investors believe it could cost up to $ 1 million in the near future. If Bitcoin follows the same course as it did in the last epoch, I expect it will surely hit a high of over $ 400,000 before another almost sudden drop in value when investors try to make the highest possible profit. If Bitcoin actually follows this path, we will likely see a massive new high before the end of 2021.
The pattern and what the future brings
It is evident that whenever a halving occurs, Bitcoin will, in due course, see a dramatic surge to a new all-time high that exceeds many expectations. Once this peak is reached, many begin to sell their investments to reap the profits. Bitcoin then sees a slump as dramatic as the surge that came before it. Bitcoin’s value provides for regular pumps followed by regular dumps until it finally stabilizes with a new bottom. It trades relatively sideways for a few months before a second surge begins. It’s not as dramatic as the previous one, however, but it pushes Bitcoin’s value high enough to see it hit at least half of its previous all-time high before the next halving.
It is likely that many of the large institutions and investors who have bought millions of dollars in Bitcoin in recent years will sell their holdings once Bitcoin reaches a sufficiently high value. Same goes for miners who have started accumulating their newly mined coins instead of selling them. In this case, Bitcoin should be somewhere between $ 350,000 and $ 450,000 if we follow the same trend in this era as we did in the last. It could be months, maybe even a year, for Bitcoin to hit this new high, but I believe we will go there later this year.
One concern that is very evident is that more and more publicly traded companies are adding Bitcoin to their balance sheets. This is great in terms of introducing and legitimizing Bitcoin as an asset. These companies have shareholders, however, and it is very likely that a company like MicroStrategy, which holds billions of dollars worth of Bitcoin, will see an activist stockholder or two on board and urge them to sell their holdings should it should reach a massive new high as predicted above.
Let’s keep looking at MicroStrategy as an example. They hold over 90,000 Bitcoin, currently valued at more than $ 5 billion, with the company’s market capitalization being just over $ 6.75 billion. Should Bitcoin hit a high of $ 400,000, it would value their Bitcoin holdings at over $ 36 billion. With BlackRock, Morgan Stanley and Vanguard owning over 30 percent of the company’s stock, they are likely to be pushed to sell as soon as possible and return the value to shareholders. That’s over 90,000 bitcoin that could flood the market. This could be the case with many other public corporations as well, not only threatening the price of Bitcoin, but trusting it to act as a store of value.
In the graphic above, it remains clear that Bitcoin has proven time and again that it is a trustworthy asset and store of value. It sees waves and falls, and it will likely be a few more years. Bitcoin is nowhere near its peak, and while it may take a few years, Bitcoin is facing tremendous growth and will continue to be widely used as it becomes clearer to global audiences.
This is a guest post by Dion Guillaume. The opinions expressed are solely their own and do not necessarily reflect those of BTC Inc. or BTC Inc. Bitcoin Magazine.