Is The Current Bitcoin Halving Cycle Already Over?
A deep dive into the lengthening of halving cycles
When examined through the lens of price action, the current Bitcoin halving cycle has been somewhat disappointing.
Many people expected the digital currency’s price to reach a new all-time high in December 2021, but it ended up correcting during that month. Does that mean this halving cycle is already over, or is bitcoin heading for a fresh record during this cycle?
What if the price expectations and predictions were simply a few months off?
In this article, we will take a deeper look at halving cycles, and examine whether they are getting longer. While many analysts made bullish price predictions for 2021 that failed to materialize, for example bitcoin reaching $100,000 before the end of the year, it is possible that these forecasts have simply not come true yet.
Graph 1 displays the percentage change since the halving day for the previous two halving cycles, as well as the current halving cycle.
The current cycle, which began in May 2020, started out relatively strong, and it had been outperforming cycle 2 percentage-wise up until day 391 of this cycle. After day 391, this latest cycle started to consistently underperform the previous two percentage-wise.
If you look at Graph 1, both cycle 1 and cycle 2 experienced clear market tops, where the price increased sharply before suffering substantial declines. This latest cycle provides a contrast, as no market top that stuck out so far.
This cycle is either different from all the other ones, or we have yet to see a clear cycle top like we did during previous cycles. It is an obvious sign that this cycle might not be out of fuel.
In Table 1, the relevant statistics are shown for halving cycle 1, halving cycle 2, and the current halving cycle. I have also included some data for the period before the first halving cycle, which I call the Genesis Cycle.
However, it is important to keep in mind that this particular time frame does not have price data right from the beginning, and it is not that comparable, since many people had yet to discover Bitcoin and the market was very small. For the sake of being thorough, it is included in the table.
In cycle 1, it took bitcoin’s price 367 days to reach a new all-time high, and during cycle 2, that figure extended to 527 days. As a result, cycle 2 took significantly longer (44%, to be exact) to climb to a fresh record.
Since we know how many days it took in previous cycles for bitcoin to reach a new cycle high, it is possible to predict when the digital currency will reach a new zenith during its current cycle, as long as one of the previous cycles repeats itself.
Table 2 shows these hypothetical dates when the cryptocurrency is predicted to attain a new high. Interestingly enough, if cycle 1 had repeated itself, bitcoin would have attained a fresh record in May 2021. Alternatively, if cycle 2 had repeated, the digital asset would have notched an all-time high in October 2021.
However, as mentioned above, cycle 2 took 160 days longer than cycle 1 for bitcoin’s price to reach a cycle high. If we take these two cycles, and use their data to create a linear trend, that would mean it would take the current halving cycle (cycle 3) 757 days to reach an all-time high. This would take place in June 2022, about five months from now.
Of course, we need to be careful here, as this projection relies upon a linear trend that uses only two data points. What is more important than the exact timing is that the cycle is potentially lengthening, and we have not necessarily reached this cycle’s high.
It is impossible to say whether bitcoin prices will reach their next record before or after June, as this depends on a wide range of factors not covered in this analysis.
Even if the aforementioned projection leaves significant room for error, it makes sense intuitively that the time required to reach a fresh, all-time high is increasing with each cycle. For instance, despite the halving of block rewards, all else being equal, more capital is needed to sustain higher prices as bitcoin’s value continues to climb, as I show in Table 2 of my December 2020 article “Halving Cycles and the Bitcoin Price.”
In summary, there has not been a clear price top in the current cycle so far, and there are indications that halving cycles might be lengthening. Both are pointing toward the possibility that we have yet to see a cycle top this halving cycle.
However, it is important to emphasize that the analysis above only examines halving cycle data, and ignores other factors. Most importantly, developments on the macro level are not considered here.
Rising inflation, a Federal Reserve whose policy makers are becoming more hawkish, and a potential rate hike in March will likely be the determining factors that affect bitcoin prices in the coming months. Depending on how these play out, the realization of this cycle’s all-time high might be pushed out even further than stated above, or in the worst-case scenario, bitcoin might already be in a bear market.
This content is for educational purposes only. It does not constitute trading advice. Past performance does not indicate future results. Do not invest more than you can afford to lose. The author of this article may hold assets mentioned in the piece.
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