In its new “2024 Halving Analysis: Understanding Market Cycles and Opportunities Created by the Halving” report , Blockware Intelligence explained why it’s expecting a target price of $400,000 for Bitcoin after its next halving.
In this article, we are going to look at the points on which this assumption is based and reexamine this possibility.
The broad consensus among cryptocurrency analysts is that Bitcoin always increases in the halving anticipation and in the halving year, as it did in the past.
But price targets are either overpessimistic or overenthusiastic. Is $400,000 really achievable?
Blockware Intelligence analysts listed six different factors that can lead Bitcoin’s price to $400,000 in the next halving and pointed out that it always rises around the halving.
It operates on a fixed supply algorithm and a transparent blockchain which gives the market more detailed information, influencing the behavior of its participants.
Bitcoin miners, responsible for introducing new coins into the market, usually sell their rewards to cover operating costs. Halvings reduce the rewards, thus lowering the selling pressure from miners.
After halving happens, less efficient miners exit, further reducing the selling pressure, which could mean a potential $2.3B reduction in selling annually.
Although this is a historically proven mechanic, it isn’t entirely true. Indeed, the logic behind “Halvings reduce the rewards, thus lowering the selling pressure from miners” can go both ways.
It can also mean that after getting half of what they did at the same price, they now have to sell a double amount of Bitcoin to cover the same costs.
What goes in favor of the bullish logic is that miners anticipate price rises as well and are not willing to sell, which increases the base price.
The predictable decrease in Bitcoin’s supply due to halvings tends to drive demand and, historically, a post-halving surge in demand has been supported by on-chain data, suggesting a positive price trend. Price would follow supply diminishing and demand increasing trends.
Despite their predictability, halvings can’t be fully accounted for in Bitcoin’s price. If prices rise prematurely, more miners might join, thus increasing sell pressure.
Furthermore, inefficient miners post-halving exit tends to reduce sell pressure. There’s a myth that halvings compromise Bitcoin’s security, but successful halvings have dispelled this myth, boosting confidence.
Following the DOW theory, the market already possesses every information. If Bitcoin halving is scheduled for four years in advance, it is already definitely priced in.
Even after Blockware Intelligence report, as they speculate on the next cycle top and project a target, some investors might buy at the current price anticipating the projected one as everything is priced in, especially major, known events.
Bitcoin’s price undergoes a four-stage cycle: Halving, Bull and Bear Market and Recovery. Despite criticisms about its volatility, Bitcoin has shown a consistent long-term growth and past cycles have seen significant increases in value after each halving.
In the chart below, it can be seen the amount of increase in Bitcoin’s price recorded in each bull cycle.
The returns appear to be diminishing with each cycle: 584x, 92x, 30x, and 7.7x.
While some speculate reduced returns from halvings as existing Bitcoin stock grows, data suggests the opposite. A significant portion of BTC remains stationary, indicating a strong holding sentiment among users.
With each halving, the reduction in selling pressure becomes more pronounced, which may lead to even larger bull runs.
In 2024, there will be less tradable Bitcoin than in any other cycle.
This is where the $400,000 target comes from. If Bitcoin reaches $35,000 on the halving day, which would historically be at the lower end of the bull cycle before a major runup, a $400,000 target for the top cycle is expected as per the assumption that this will be the first time the returns won’t diminish.
Analysts say that the next cycle will be the first one to break this trend, offering increasing returns from the previous cycle, but there isn’t much to support that aside from the assumption of diminishing tradable supply.
No one can know how investors will feel in the future and how long they’re willing to hold and what the macro-economic environment will be.
The $400,000 target has been drawn from the assumption of $35,000 Bitcoin at the date of the halving and it’s based on “a reasonable expectation due to the $2B halving supply shock and increasing scarcity of liquid BTC supply on exchanges.”
While both Bitcoin and gold serve as non-sovereign stores of value, the first offers several advantages, including absolute scarcity and better divisibility.
After the 2024 halving, Bitcoin’s inflation rate will drop below 1%, making it more attractive than gold. A potential market cap nearing that of gold is predicted for the upcoming Bitcoin cycle if the price reaches $400,000.
But there are a couple of variables that this report is based on that may vary a lot. First is that no one knows what the investor sentiment will be, as well as miners selling interest. Second is the assumption of increasing returns which historically never happened.
The logic behind this analysis is supported by strong on-chain evidence. As a deflationary currency with diminishing supply and increasing global demand, Bitcoin is expected to reach new all-time highs in the next cycle.
Furthermore, many investors are expecting Bitcoin to surpass gold in market cap, but Bitcoin still doesn’t have any utility and it’s not used for transactions nor for its store of value capacity.
It has global recognition and a couple of major investors which can be attributed to the enthusiasm that one day Bitcoin will prove itself as a strong asset and, “on a long-term scale, the price is always going up.”
Bitcoin’s price at $400,000 in the next cycle is definitely possible but it’s a bit overenthusiastic. It’s still a question of whether or not the bull cycle even started.
There is still a possibility that the price can fall to $11,000 before starting its next bull cycle. If it does, will it reach $35,000 on the halving day per Blockware Intelligence expectation?
It is still very early to be projecting the target for the next cycle top. Several factors have to be taken into account when projecting the market top and, out of those, it must be on a wait-and-see position.
Please note that the contents of this article are not financial or investing advice. The information provided in this article is the author’s opinion only and should not be considered as offering trading or investing recommendations. We do not make any warranties about the completeness, reliability and accuracy of this information. The cryptocurrency market suffers from high volatility and occasional arbitrary movements. Any investor, trader, or regular crypto users should research multiple viewpoints and be familiar with all local regulations before committing to an investment.