Cryptocurrency exchange Coinbase released a “Bitcoin Halving Guide” for institutional investors on Wednesday (20th), describing the price performance of Bitcoin before and after the previous three halving events. The company pointed out that based on historical trends, it is easy to infer that Bitcoin’s recent strong performance will continue before and after the upcoming halving, but investors should still be cautious about this view.
Price Trends of Bitcoin Before and After Halving
The fourth halving of Bitcoin will occur in April 2024 (only 30 days remaining from the time of this article’s publication), reducing the miner reward from 6.25 BTC to 3.125 BTC. This mechanism has historically influenced the value of Bitcoin and investor strategies by limiting currency inflation through reducing the supply of new coins entering circulation.
According to Coinbase’s report, based on the price trends before and after each halving, Bitcoin has averaged a 61% increase in the six months before halving and a 348% increase in the six months after halving. However, the company noted that the performance of each cycle is not always the same.
First halving in 2012: BTC increased by 139% in the six months before halving and by 923% in the six months after halving.
Second halving in 2016: BTC increased by 46% in the six months before halving and by 37% in the six months after halving.
Third halving in 2020: BTC actually decreased by 2% in the six months before halving but increased by 82% in the six months after halving.
Coinbase believes that given the previous trends, it is easy to infer that Bitcoin’s recent strong performance (up 157% since mid-October) will continue before and after the upcoming halving, but investors should still be cautious. The report stated:
Coinbase also pointed out that the current cycle trend is most similar to the market cycles from 2018 to 2022, during which Bitcoin rose by 500% from the cycle low.
Factors Affecting Bitcoin Price
Coinbase also revealed broader macroeconomic factors affecting Bitcoin price, mentioning that Bitcoin’s strong performance after the 2020 halving was largely due to the environment created by unusually loose monetary policies and unprecedented fiscal stimulus measures in response to the Covid-19 pandemic. The recent upward trend in Bitcoin prices may be more driven by optimistic sentiments towards the prospects of a Bitcoin spot ETF.
Coinbase also presented some macro factors that could have a meaningful impact on Bitcoin prices:
The report also indicated that on-chain data analysis provides another perspective to understand factors influencing prices, such as the supply of Bitcoin held by long-term holders. Coinbase concluded, “Halving is bullish from a historical perspective, but it is just one of many factors influencing the trajectory of Bitcoin prices.”