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(Kitco News) – Bitcoin (BTC) got off to a hot start in 2023 as its price rallied 89% from $16,450 on January 1 to $30,050 on April 14, but has since struggled to match that momentum and has instead traded sideways within a range of $24,780 and $31,880.
The rally came after a horrendous year for the crypto market as multiple high-profile collapses plunged the ecosystem into a deep crypto winter, which resulted in Bitcoin experiencing “the longest period of negative year-over-year returns in its history, lasting 15 months,” according to analysts at Pantera Capital.
“Our view is that we’ve seen enough – there’s just so long markets can be down,” the firm said in its recent letter to clients. “We believe the combination of recent positive events – the XRP ruling and endorsements by BlackRock et al. – in addition to the Bitcoin Halving expected to occur in April 2024, provide a strong setup for the next bull market for digital assets.”
Bitcoin price trend and year-over-year returns. Source: Pantera Capital
Focusing specifically on the upcoming reduction in new Bitcoin emissions, Pantera noted that the next halving is projected to occur on April 20, 2024, and will see the mining reward decrease from 6.25 BTC to 3.125 BTC per block.
While this event has been covered extensively by crypto news outlets, with many analysts saying the halving has already been priced into the price of Bitcoin, Pantera Capital said there is still money to be made on the development as previous cycles have demonstrated.
“Efficient Markets Theory would hold that if we **all** know it’s going to happen, then it has to be priced in,” they wrote. “Paraphrasing a line attributed to Warren Buffet on the dogma, ‘The markets are almost always efficient, but the difference between almost and always is $80 billion to me.’ Thus, even if we think everybody knows something, it doesn’t mean there isn’t a ton of money to be made.”
The analysts noted that if the demand for new Bitcoins remains constant while the supply of new Bitcoins is cut in half, “this will force the price up.” Previous cycles showed that there has also been an increase in demand for Bitcoin prior to halving events “because of the anticipation of a price increase,” they said.
“Over the years we have stressed that the halving is a big event – but it takes years to play out,” they said. “Bitcoin has historically bottomed 477 days prior to the halving, climbed leading into it, and then exploded to the upside afterward. The post-halving rallies have averaged 480 days – from the halving to the peak of that next bull cycle.”
Bitcoin halving rallies. Source: Pantera Capital
“IF history were to repeat itself, the price of Bitcoin should have troughed December 30, 2022,” they said. “The actual low occurred on November 9th, 2022 amidst the FTX fiasco – a month and a bit early. The current price of Bitcoin is outpacing our projection to $35,500/BTC at the halving date, now 7% above that forecast.”
To determine how the upcoming halving could affect the price of BTC, the analysts looked at how the previous halvings reduced the supply of new Bitcoins and correlated that with the impact on price.
“Since most bitcoins are now in circulation, each halving will be almost exactly half as big a reduction in new supply,” they said. “If history were to repeat itself, the next halving would see bitcoin rising to $35k before the halving and $148k after.”
Halvings impact on price. Source: Pantera Capital