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 halvings. 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.
The trend of Bitcoin before and after the halving
The fourth Bitcoin halving will occur in April 2024 (only 30 days from the publication of this article). The miner reward will decrease from 6.25 BTC to 3.125 BTC. This mechanism has always affected the value of Bitcoin and investor strategies by limiting inflation through reducing the circulation of new coins.
According to Coinbase’s report, based on the price trends before and after previous halvings, Bitcoin has risen an average of 61% in the six months before halving, and the average increase in the six months after halving is 348%. However, the company pointed out that the performance of each cycle is not necessarily the same.
The first halving in 2012: BTC rose 139% in the six months before halving and 923% in the six months after halving.
The second halving in 2016: BTC rose 46% in the six months before halving and 37% in the six months after halving.
The third halving in 2020: BTC actually fell 2% in the six months before halving, but rose 82% in the six months after halving.
Coinbase believes that based on 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 about this view. The report states:
Coinbase also pointed out that the current trend of the cycle is most similar to the market cycle from 2018 to 2022, during which Bitcoin rose 500% from the cycle low point.
Other factors affecting Bitcoin prices
Coinbase also revealed broader macroeconomic factors that affect Bitcoin prices. It mentioned that Bitcoin’s strong performance after the 2020 halving was largely due to the exceptionally loose monetary policies and unprecedented fiscal stimulus measures taken in response to the Covid-19 pandemic. The recent surge in Bitcoin may also be driven by optimistic sentiment towards the prospects of Bitcoin spot ETFs.
Coinbase also proposed some macro factors that may have a meaningful impact on Bitcoin prices:
The report also stated that on-chain data analysis provides another perspective to understand factors that affect prices, such as the supply of long-term Bitcoin holders. Coinbase concluded, “Although halving is bullish from a historical perspective, it is only one of the many factors that influence the trajectory of Bitcoin prices.”
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