Is it Really ‘Up Only’ for Bitcoin?

It’s
that
time
again
—
when
your
friends
and
family
members
who
know
you’re
into
Bitcoin
text
asking
if
now
is
the
time
to
buy.

A
time
that
signifies
we’re
at
another
peak
in
bitcoin’s
price.

I
know,
I
know.
How
bah-humbug
of
me.

This
post
is
part
of
CoinDesk’s



“Crypto
2024”


predictions
package.

But
the
truth
is,
if
you’re
thinking
about

buying
bitcoin
right
now,
it
might
not
be
the
best
time
to
make
a
sizable
purchase
—
despite
the
fact
that
we
might
see
spot
bitcoin
ETFs
(exchange-traded
funds)
approved
in
the
near
future
(possibly
as
early
as
January).

Let’s
start
by
looking
at
bitcoin’s
price
action
during
periods
leading
up
to
the
last
two

Bitcoin
halvings.
(The
next
is
due
in
late-April,
when
block
840,000
is
expected
to
be
mined.)

Bitcoin
halving
cycles
last
about
four
years
(210,000
blocks
produced
at
approximately
10
minutes
per
block).
At
the
commencement
of
each
cycle,
the
block
subsidy
reward
that
Bitcoin
miners
receive
is
cut
in
half,
which
triggers
a
bitcoin
supply
shock.

Historically,
bitcoin’s
price
has
risen
dramatically
during
the
year
and
a
half
that
follows
the
halving.
The
price
then
tanks
and
trades
in
a
range
for
the
cycle’s
other
two
and
a
half
years.

From
late-2013
until
mid-2016,
when
the
second
halving
occurred,
bitcoin’s
price
fell
from
$1,166
to
$156.
It
then
rebounded
to
$780
—
67%
of
the
previous
all-time
high
—
before
falling
40%
to
$472
in
August
2016.

The
$472
price
point
marked
a
local
bottom
just
one
month
after
the
second
halving
took
place.

From
late
2017
to
late
2018,
bitcoin’s
price
fell
from
$19,666
to
$3,150
before
rebounding
to
$13,882
—
70%
of
the
previous
all-time
high.
By
March
2020,
its
price
had
fallen
72%
to
$3,867.

$3,867
marked
a
local
bottom
two
months
before
the
third
Bitcoin
halving,
which
occurred
in
May
2020.

Another
two-and-a-half-year
period
that
precedes
a
Bitcoin
halving
is
coming
to
an
end.
This
period
began
in
late
2021
and
will
end
in
April
2024,
when
the
fourth
halving
is
scheduled
to
occur.

During
this
period
thus
far,
bitcoin’s
price
has
fallen
from
$69,000
to
$15,522
before
rebounding
to
$44,759
—
65%
of
the
previous
all-time
high.

This
65%
rebound
—
the
current
one
—
is
awfully
close
to
the
67%
and
70%
rebounds
we
saw
in
the
two
previous
cycles.

And
so
the
big
question
now
is:
Will
bitcoin’s
price
retrace
significantly
leading
up
to
the
next
halving
as
it
has
leading
up
to
the
two
previous
halvings?

If
bitcoin’s
price
were
to
fall
40%
from
these
current
levels
—
as
it
did
in
2015-2016
—
we’d
see
bitcoin’s
price
at
$26,855.
(As
of
writing,
it
is
approaching
$44,000).

If
it
were
to
fall
72%
—
as
in
2019-2020
—
we’d
see
bitcoin’s
price
at
$12,532.

I’ve
seen
very
few
people
mention
such
numbers
in
the
wake
of
the
euphoria
bitcoin
investors
are
currently
experiencing.

So,
will
this
time
be
different?

Aren’t
we
waiting
for

billions
of
dollars
to
flow
into
bitcoin
almost
immediately
after
the
spot
bitcoin
ETF
is
approved?

No
one
knows
whether
an
approval
of
a
spot
bitcoin
ETF
is
priced
into
the
bitcoin
market
yet.

Some
believe
it
is
and
that
the
announcement
of
a
spot
bitcoin
ETF
will
be
a
“buy
the
rumor,
sell
the
news”
event
—
a
situation
in
which
bitcoin’s
price
rises
in
anticipation
of
a
spot
bitcoin
ETF
announcement,
as
it
has
been,
but
then
sells
off
once
the
ETF
is
announced.

Others
say
it’s
a
“buy
the
rumor,
buy
the
news”
event
—
a
situation
in
which
bitcoin’s
price
rises
in
anticipation
of
a
spot
bitcoin
ETF

and
rises
again
once
the
ETF
is
announced.

The
truth
is
that
no
one
knows
what
will
happen
in
the
wake
of
a
spot
bitcoin
ETF
being
approved
and
coming
to
market.

And
with


Bloomberg

analysts
predicting
a
90%
chance
of
approval
by
January
10,
2024,
hardly
anyone
seems
to
be
asking
the
following
question:
What
happens
to
bitcoin’s
price
if
the
spot
bitcoin
ETF

isn’t
approved?
(Though

CoinDesk
did.)

This
scenario
could
easily
be
grounds
for
a
significant
drawdown
in
bitcoin’s
price.
The
drawdown
might
not
be
as
severe
as
the
previous
two,
but
it
would
likely
be
notable.

Also,
what
happens
to
bitcoin’s
price
in
the
event
of
a
hard
landing?

While
the
powers
that
be
and
major
institutions
will
have
you
believe
that
we’re
on
our
way
to
a

soft
landing
or,
at
worst,
a

mild
recession,
those
of
us
who
remember
hearing

the
exact
same
rhetoric
in
2008
aren’t
so
convinced.

A
number
of
reputable
outlets
have
stated
that
we
may
be
amid
a
“melt-up”
—
a
situation
in
which
asset
prices
rise
parabolically
before
crashing
catastrophically.

This
isn’t
hard
to
believe
given
that
the
Dow
Jones
Industrial
Average
is
at
an
all-time
high,
while
the
S&P
500
and
the
Nasdaq
are
almost
there,
as
well
—
all
while
we’re
still
in
an
environment
in
which
investors
can
earn
over
5%
risk-free
in
money
market
mutual
funds.

If
a
melt-up
is
currently
taking
place
and
bitcoin’s
price
is
going
along
for
the
ride,
then
there
are
two
more
questions
we
have
to
ask:
How
high
does
bitcoin’s
price
rise
before
it
comes
crashing
down,
and
what
sort
of
investing
strategy
is
best
to
employ
if
this
is
the
case?

While
the
first
question
is
difficult
to
answer,
the
second
isn’t
as
challenging.

By
all
means,
continue
to

HODL
your
BTC
and
DCA
(dollar-cost
average)
into
the
asset,
as
these
investment
strategies
have
proven
fruitful
for
anyone
who
has
held
BTC
for
more
than
four
years.

The
one
thing
you
might
want
to
avoid
amid
this
euphoria
is
aping
into
a
large
position
at
these
levels
—
especially
with
any
sort
of
leverage.
(To
quote
the
Founder
&
CEO
of
Custodia
Bank,

Caitlin
Long,
“A
fool
and
their
leveraged
bitcoin
are
soon
parted.”)

If
we
see
a
massive
drawdown
in
bitcoin’s
price,
you’ll
want
to
have
some
cash
on
the
sidelines
to
buy,
not
find
yourself
bitcoin-less
and
cash-strapped
due
to
acting
like
an
overzealous
gambler.

As
always,
we
don’t
know
where
bitcoin’s
price
will
go
from
here.
Maybe
it
actually
will
move
up
only
both
into
and
beyond
the
halving.

But
if
history
repeats
itself
and
bitcoin
performs
the
way
it
has
right
before
prior
halvings,
we
may
see
bitcoin
at
a
significantly
lower
price
as
the
halving
in
April
2024
approaches.