Bitcoin has exploded in the past 15 months. The stock is up over 320% and near its all-time high of $73,750. Bitcoin's market cap exceeds $1 trillion. How about if I told you Bitcoin was just getting started and may reach $1 trillion in market valuation by 2025?
There are lots of reasons to roll your eyes or laugh politely. The much-anticipated Bitcoin halving could double Bitcoin's value and add $1 trillion to its market worth in the next year, according to Wall Street analysts. Are they right?
Bitcoin halving reasoning Start by knowing that the Bitcoin halving will happen on April 19 and you probably won't notice. Unlike the total solar eclipse, millions won't gather in specific locations to cheer on the spectacle. Bitcoin creator Satoshi Nakamoto won't appear on late-night TV. At best, #Bitcoin will trend on social media.
Everything happens algorithmically, not in reality. The Bitcoin algorithm halves mining earnings every four years. They currently receive 6.25 BTC per Bitcoin blockchain block, however on April 19, they will receive 3.125 BTC. Another view is that Bitcoin creation is halving. And this has huge economic effects. It makes Bitcoin more scarce, making it a better long-term investment. The algorithm limits Bitcoin's lifetime supply to 21 million coins. There are 19.7 million Bitcoins in circulation, therefore 94% of the total quantity has been created!
This is why many analysts believe there could be a "supply squeeze" or "supply shock" as everyone rushes to obtain Bitcoin. The "supply squeeze" after the halving could be severe due to claims that Bitcoin exchanges are running out of stock. With all the new demand from spot Bitcoin ETFs, Bitcoin's price might surge.
Past price performance It's clear from prior Bitcoin halving cycles that scarcity exists. Three Bitcoin halving cycles—2012, 2016, and 2020—have resulted to massive price gains and a new all-time high. Consider the 2012 halving. Bitcoin rose 9,575% from $12 to $1,161. Bitcoin rose 3,233% from $600 to $20,000 after the 2016 halving. Bitcoin rose 667% from $9,000 to $69,000 after the 2020 halving.
So it's not just a 10% increase. Financial assets have never seen such massive parabolic moves. No wonder hedge fund managers and crypto researchers are raising their Bitcoin price projections for 2024 post-halving. It appears that Bitcoin will reach $150,000 by 2025, tripling its price and generating over $1 trillion in market cap.
Manage your expectations. Good start, right? Halving makes economic sense, and we have plenty of price data to support it. Not so fast. Remember that Bitcoin took over a decade to reach $1 trillion. So Bitcoin will reproduce a decade's worth of labor in a year?
Additionally, examine gains after each halving cycle. Decreased over time. So this fourth halving cycle may not provide as much. Coinbase Global recently looked at post-halving returns over six months, which is even less impressive. Bitcoin rose 82% in the first six months of the 2020 halving cycle.
Finally, when Bitcoin becomes widespread, it may behave more like a conventional financial asset. Its volatility may decrease, reducing its tremendous upside potential. So manage your expectations this time. Bitcoin's $2 trillion milestone may take longer than expected.
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