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To celebrate this Christmas holiday season, I will be publishing a Four-Part Series on the Bitcoin Halving effect on Bitcoin’s price. Each Part will be released every Monday in the coming weeks leading up to Christmas and the New Year.
Today’s newsletter edition is Part 1 of the series and is free for everybody to read.
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Preface
In early September 2019, I published “Bitcoin Halving - Everything You Need To Know”.
In this article, I described the effect that the Bitcoin Halvings have had on Bitcoin’s price throughout history.
I shared a few key price tendencies that have consistently recurred over the course of time and used these to understand the potential effect Bitcoin’s third Halving might have on Bitcoin’s price going forward.
In the year and three months since the article was published, Bitcoin Halving #3 came and went.
And in the time that has since passed - Bitcoin’s price revisited the ~$20,000 area.
Therefore it is not only high time for an update to the original article but also an opportunity to further expand on some key ideas.
This article is Part One in a Four-Part series that will be released every Monday to readers of the newsletter in the coming weeks leading up to Christmas and the New Year.
Part 1 figures as an extensive update to the original article.
It focuses on updating key conclusions made in the inaugural article as well as verifying the key recurring price tendencies to deduce how they’ve since played out.
Given how these recurring price tendencies were used at the time to predict Bitcoin’s price action in the context of a Halving #3 that hadn’t yet occurred at the time, Part 1 will also focus on verifying how these predictions have held up or continue to hold up today.
Part 1
Bitcoin Halving #1 - November 2012
The first ever Bitcoin Halving took place at the end of November 2012.
It took approximately 513 days for Bitcoin to rally over 13,000% from the $2.01 bottom to the Market Cycle top of $270.94.
Bitcoin’s first Halving was a key catalyst that spurred significant growth and a new bull cycle for Bitcoin.
As soon as Bitcoin reached its post-Halving peak of $270.94, the 2013 Bear Market began as Bitcoin’s price declined 80%. This Bear Market lasted approximately 87 days.
Bitcoin Halving #2 - July 2016
The second Bitcoin Halving took place in early July 2016.
It took 1068 days for Bitcoin to rally over 12,000% from the $164.01 bottom to the Market Cycle top of $20,074.
After the $20,074 peak — Bitcoin entered a 51 week bear market that bottomed in mid-December 2018.
Bitcoin Halving #3 - May 2020
The third Bitcoin Halving took place in early May 2020.
So far, it has taken Bitcoin over 714 days to rally +530% since its $3,152 bottom set back in mid-December 2018.
That said, Bitcoin’s current Halving #3 Market Cycle is still incomplete as of this writing.
Now that Halving #3 has passed however, it is now even clearer that there are a few key principles worth reinforcing:
The Bitcoin Halving is a key catalyst in propelling Bitcoin into a new bull market.
Bitcoin’s price appreciates both leading up to the Halving as well as many months after the Halving has taken place.
And with Bitcoin’s price hovering just below ~$20000, it is likely that in the coming months yet another principle will become confirmed, specifically:
Bitcoin has always reached a new All-Time High as a result of the Halving. But it is many months after the Halving that this new All-Time High in Bitcoin’s price is set (note: as of this writing, it is seven months after Halving #3 and Bitcoin is currently at $20000, trying to challenge for a new All-Time High).
Let’s now divide Bitcoin’s price into “Pre-Halving” and “Post-Halving” periods and discuss in detail how the tendencies or themes that have recurred in Bitcoin’s price throughout history as a result of the Halving have played out since their initial coverage in the original September 2019 article.
Bitcoin Halvings #1, #2, and #3 — A Detailed Breakdown
In the original September 2019 article on the Bitcoin Halving effect on Bitcoin’s price, I outlined a few key tendencies that have repeatedly appeared in Bitcoin’s price throughout its history.
Let’s recount these and attempt to address each in the context of how they hold up today:
Most of the exponential growth in Bitcoin’s price as a result of the Halving occurs after the Halving.
Bitcoin experienced stronger and quicker growth prior to Halving #1 compared to the growth prior to Halving #2.
If Bitcoin rallies less pre-Halving, then it will rally more post-Halving.
There has always been a pre-Halving retrace (i.e. “shake-out”).
The pre-Halving top prior to the “shake-out” retrace has historically been Bitcoin’s highest pre-Halving price point, but wasn’t high enough to set a new All-Time High
Key Tendency #1
Most of the exponential growth in Bitcoin’s price as a result of the Halving occurs after the Halving.
While Bitcoin has rallied +143% to date since its third Halving, it is still too early to adequately verify this tendency at this stage in Bitcoin’s current Market Cycle.
Key Tendency #2
Bitcoin experienced stronger and quicker growth prior to Halving #1 compared to the growth prior to Halving #2.
Here is a summary Bitcoin’s price growth prior to each of its Halvings:
It took Bitcoin 273 days to rally 683% to reach its pre-Halving #1 top
It took Bitcoin 518 days to rally 383% to reach its pre-Halving #2 top.
It took Bitcoin 196 days to rally 346% to reach its pre-Halving #3 top.
Interestingly, Bitcoin’s pre-Halving #3 performance resembles Bitcoin’s pre-Halving #2 performance (i.e. 346% vs 383%).
That said, Bitcoin managed to rally a similar amount in 196 days compared to the 518 days it took Bitcoin to rally 383% to reach its pre-Halving #2 top, or the 273 days it took Bitcoin to reach its pre-Halving #1 top.
The main insights are these:
Bitcoin’s pre-Halving #3 rally was similar in magnitude to the pre-Halving #2 rally.
But Bitcoin’s pre-Halving #3 rally was the fastest one to achieve its pre-Halving top.
This is fascinating because it showcases that a faster pre-Halving rally does not translate into a stronger one, like perhaps previously thought.
That said, Bitcoin’s pre-Halving #3 price action has confirmed itself to have closely resembled Bitcoin’s pre-Halving #2 price action, as assumed in the original September 2019 article.
Key Tendency #3
If Bitcoin rallies less pre-Halving, then it will rally more post-Halving.
Prior to the first Halving, Bitcoin rallied 663% to reach its pre-Halving #1 top but later rallied 3,400% after the Halving.
Prior to the second Halving, Bitcoin rallied 383% to reach its pre-Halving #2 top but later rallied 4,080% after the Halving.
Prior to the third Halving, Bitcoin rallied 346% to reach its pre-Halving #3 top but so far has rallied 143% after the Halving.
Whether or not this tendency plays out remains to be seen, but the fact that pre-Halving #2 and pre-Halving #3 periods were quite similar in terms of magnitude possibly suggests that post-Halving #2 and post-Halving #3 could be comparable as well.
Does that therefore mean that Bitcoin will rally more post-Halving #3 (just like it rallied post-Halving #2) compared to post-Halving #1?
How Have Tendencies #4 and #5 Held Up?
With Halving #3 in the books, we can now sensibly verify the remaining Pre-Halving tendencies covered in the original September 2019 article.
The remaining two tendencies to discuss are:
Key Tendency #4
There has always been a pre-Halving retrace (i.e. “shake-out”).
Key Tendency #5
The pre-Halving top prior to the “shake-out” retrace has historically been Bitcoin’s highest pre-Halving price point, but wasn’t high enough to set a new All-Time High
Let’s discuss how these two tendencies have played out by first summarising the Pre-Halving Retraces prior to Halving #1 & Halving #2.
The pre-Halving #1 retrace occurred approximately 100 days before the Halving, was -50% deep, and lasted 2 days.
The pre-Halving #2 retrace occurred 24 days before Halving #2, was -38% deep, and lasted for 44 days. The retrace continued 20 days after the Halving.
Now that Bitcoin is now several months beyond Halving #3 - what can we say about this tendency in the context of the Pre-Halving #3 period?
I’ll preface this answer with a direct quote from my original September 2019 article “Bitcoin Halving - Everything You Need To Know” about Pre-Halving retraces:
This pre-Halving retrace has been a Bear Trap for many investors in the past.
Many investors would sell their Bitcoin to book their profits whereas others would sell in fear of a strong downtrend and get shaken out of their investments.
In any case, both types of investors would miss out on the future exponential uptrends.
Simply knowing about this tendency could potentially help investors avoid such a fate leading up to Bitcoin’s third Halving, should history indeed repeat itself by presenting such a retrace yet again.
(…)
Leading into the Halving, there tends to be an acceleratory run-up in Bitcoin’s price before the “shake-out” retrace occurs. Since its bottom in the previous bear market, this happens to be Bitcoin’s highest price point before the actual Halving.
However, this price point doesn’t eclipse the previous All-Time High.
In fact, this price point is approximately -33% (i.e. Halving #2) to -51%
(i.e. Halving #1) below the old Bitcoin All-Time High from the previous Market Cycle.
So how did the Pre-Halving #3 retrace play out?
Let’s unpack the quoted insights in the context of the Pre-Halving retrace prior to Halving #3.
Pre-Halving Retrace for Halving #3
Below you’ll find both the chart from the original September 2019 article and the up-to-date version of that same chart:
The pre-Halving #3 retrace occurred 322 days before Halving #3, was -72% deep, and lasted for approximately 266 days. The retrace ended 56 days before Halving #3.
It’s true - the pre-Halving retrace that occurred prior to Halving #3 was unique.
It lasted longer and was much deeper than previous pre-Halving retraces, not to mention it was fuelled by fears of a novel global pandemic at the time.
Despite that, many of the general historically recurring principles across all pre-Halving retraces still managed to hold true:
The pre-Halving retrace is the ultimate Bear Trap (i.e. “shake-out”) for investors.✓
The investors that got shaken out did miss out on the future exponential uptrend that Bitcoin is currently enjoying. ✓
The price point that was reached (i.e. $13900) was indeed Bitcoin’s highest price point before the actual Halving; a price point that didn’t eclipse the previous All-Time High of $20,000. ✓
And lastly, the price point of $13,900 was approximately -30% below the old Bitcoin All-Time High of $20000, falling very close in the historical -33%-51% range. ✓
So in sum - how did Bitcoin follow through on these two historically recurring price tendencies prior to the Halving?
Key Tendency #4: There has always been a pre-Halving retrace (i.e. “shake-out”) ✓
Key Tendency #5: The pre-Halving top prior to the “shake-out” retrace has historically been Bitcoin’s highest pre-Halving price point, but wasn’t high enough to set a new All-Time High ✓
As Mark Twain once said: “History doesn’t always repeat itself, but it often rhymes.”
All things considered, history rhymed quite well in the end.
The Black Swan Pandemic-Fuelled Crash
One last thing to consider before we move away completely from the topic of the pre-Halving retrace.
There is no question that the pandemic-fuelled Bitcoin crash earlier in 2020 was a Black Swan event.
But that being said, no matter how anomalous the crash was, it facilitated a basic four-step breakout process in Bitcoin’s price action.
Consider the tweet below:
Most breakouts in price are comprised of four steps:
Breakout
Pullback
Retest Attempt (i.e. “Resistance-Support Flip”)
Trend Continuation
Technical Analysts look to these four steps in an effort to gain a sense of confidence in the possibility that a new trend may be forming.
In the context of Bitcoin’s overall Market Cycle, the Ascending Triangle that Bitcoin’s price had formed in late 2018-early 2019 (i.e. Bitcoin’s Accumulation Range) may have been only the first step in an overall macro four-step breakout process.
That is, the breakout rally to $13900 was the breakout…
The pullback into the $3000-$4000 area was the “Retest Attempt (i.e. Resistance-Support Flip)” whereby a previous area of sell-side pressure and resistance confirmed itself into a new region of buy-side support…
And a successful retest attempt preceded a full confirmation that Bitcoin had indeed formed a new trend.
Predicting the “Halving effect” on Bitcoin’s Price - a Brief Update
In the original September 2019 article, I shared some insights on how Halving #3 could indeed impact Bitcoin’s price using data from previous Bitcoin Halvings, should history repeat itself.
Let’s recount these and attempt to address each in the context of how they hold up today:
Bitcoin has rallied 12,000%-13,300% in each of its Halvings to date.
A new Market Cycle high tends to be made just before the Halving but it doesn’t eclipse the old All-Time High.
After a new Market Cycle high is set, a retrace will occur prior to the Halving.
New All-Time High in Bitcoin’s price will occur after the Halving.
Insight #1
Bitcoin has rallied 12,000%-13,300% in each of its Halvings to date.
As of this writing, Bitcoin has rallied over 530% since its December 2018 bottom to revisit its old All Time High of ~$20,000.
That said, Bitcoin’s post-Halving uptrend isn’t over yet.
It is still too early to verify the insight at this stage in Bitcoin’s current Market Cycle.
Insight #2
A new Market Cycle high tends to be made just before the Halving but it doesn’t eclipse the old All-Time High.
Indeed, Bitcoin registered a local top of $13,900 prior to Halving #3, but ultimately failing to eclipse the old All-Time High of $20,000.
This turn of events therefore has satisfied the historical tendencies of setting a new Market Cycle Local Top prior to the Halving but not a new All-Time High.
Here’s a direct quote from my original September 2019 article “Bitcoin Halving - Everything You Need To Know” about the potential implications of this:
This in turn would also satisfy another key tendency: if Bitcoin rallies less pre-Halving, it will rally more post-Halving (and for a longer period of time).
(…)
[Therefore] it would take Bitcoin a longer time to manage its typical post-Halving growth (after all, it took Bitcoin over 500 days to manage an over 4080% rally to new ATHs [after Halving #2]).
If Bitcoin’s post-Halving #3 growth resembles Bitcoin’s post-Halving #2 growth, then Bitcoin may see a new All-Time High over 500 days after the Halving (i.e. by Quarter 4, 2021).
Insight #3
After a new Market Cycle high is set, a retrace will occur prior to the Halving.
As discussed earlier when covering the historically recurring pre-Halving retraces, it is clear Bitcoin indeed repeated the tendency of experiencing a retrace prior to the Halving after setting its Market Cycle high of $13,900.
Insight #4
New All-Time High in Bitcoin’s price will occur after the Halving.
To quote from the original September 2019 article:
Historically, Bitcoin has set a new All-Time High after every Halving.
Whatever All-Time High price Bitcoin reaches, this new record is most likely to take place many months after the Halving.
As of this writing, it is almost seven months after the Halving and Bitcoin is currently in the process of attempting a break past $20,000 (i.e. Bitcoin’s price as of this writing is at $19,300).
Conclusion
History has a habit of repeating itself when it comes to Bitcoin’s price action in the context of its Halving events.
And as we’ll continue to explore in the upcoming Parts of this Bitcoin Halving Series…
History repeats itself all too frequently to simply ignore it.
Feel free to Subscribe for Parts 2, 3, and 4 of the Bitcoin Halving series - coming out every Monday over the course of the coming weeks leading up to Christmas and the New Year.
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My man, what an incredible piece of art! I'm gratefull to be able to learn so much from you Rekt, thank you!!!