The excitement is palpable again. Friends and family who know of your interest in Bitcoin are texting, asking if now is the right time to buy. This surge in curiosity often coincides with a peak in Bitcoin’s price.
It might sound discouraging, but if you're considering entering the market now, it may not be the ideal moment for a major purchase—even with the potential approval of a spot Bitcoin ETF (exchange-traded fund) possibly as soon as January.
Why? Let’s examine Bitcoin’s price behavior leading up to the past two halving events. The next halving is anticipated around late April, triggered upon the mining of the 840,000th block.
Bitcoin halvings occur approximately every four years (each cycle produces about 210,000 blocks, with each block taking roughly 10 minutes). At each halving, the block subsidy reward for miners is cut in half, creating a supply shock.
Historically, Bitcoin’s price has surged significantly in the year and a half following a halving. It then typically declines and trades within a range for the remainder of the cycle, about two and a half years.
During the second halving cycle, from late 2013 to mid-2016, the price dropped from $1,166 to $156. It then rebounded to $780—67% of its previous all-time high—before declining by 40% to $472 by August 2016. This $472 level marked a local bottom within a month of the halving.
In the third cycle, from late 2017 to the end of 2018, Bitcoin fell from $19,666 to $3,150, then rallied to $13,882—70% of its prior peak. By March 2020, it had dropped 72% to $3,867, which became the local bottom two months before the May 2020 halving.
We are now nearing the end of another pre-halving cycle. This one began in late 2021 and is set to conclude with the fourth halving in April 2024. So far, Bitcoin has dropped from $69,000 to $15,522, then rebounded to $44,759—about 65% of its previous all-time high.
This 65% rebound closely mirrors the 67% and 70% rebounds seen in the prior two cycles. The critical question now is: Will Bitcoin experience a significant pre-halving retracement similar to past cycles?
If Bitcoin were to drop 40% from current levels, as it did between 2015 and 2016, we could see it fall to around $26,855. A 72% drop, like the 2019–2020 decline, would bring it down to approximately $12,532. Such possibilities are rarely discussed amid the current investor enthusiasm.
Could this time be different? With the potential for billions of dollars to flow into Bitcoin almost immediately upon the approval of a spot Bitcoin ETF, perhaps it is.
No one knows whether the approval of a spot Bitcoin ETF is already priced into the market. Some believe it is, suggesting that the announcement will be a "buy the rumor, sell the news" event—prices rise in anticipation but fall after the ETF is approved. Others argue it will be a "buy the rumor, buy the news" scenario, with prices continuing to climb post-approval.
The truth is, no one can predict with certainty what will happen once a spot Bitcoin ETF is approved and launched. Bloomberg analysts estimate a 90% chance of approval by January 10, 2024. Yet, few are asking what might happen if the ETF is not approved—a scenario that could easily justify a significant price drop, perhaps not as severe as previous cycles but concerning nonetheless.
Moreover, how would Bitcoin perform in the event of a hard economic landing? While policymakers and major institutions suggest we are headed for a soft landing or, at worst, a mild recession, those who recall similar assurances in 2008 remain skeptical.
Many credible sources indicate we might be in a "melt-up"—a situation where asset prices rise parabolically before crashing sharply. With the Dow Jones Industrial Average at all-time highs and the S&P 500 and Nasdaq nearly there, this isn’t far-fetched, especially when investors can still earn over 5% risk-free in money market mutual funds.
If a melt-up is occurring and Bitcoin is riding the wave, we must ask: How high might Bitcoin go before a crash, and what investment strategy is best in such a scenario? While the first question is tough to answer, the second is less challenging.
Regardless of market conditions, continuing to HODL your Bitcoin and employing a dollar-cost averaging (DCA) strategy has proven effective for those holding the asset for over four years. In times of frenzy, it’s wise to avoid taking on significant leverage at current levels—especially any form of borrowed funds. As Caitlin Long, founder and CEO of Custodia Bank, aptly tweeted, "Dumb money and its Bitcoin leverage are soon parted."
If a substantial price drop occurs, you’ll want cash on hand to buy more, rather than being left with neither Bitcoin nor funds due to overzealous speculation.
As always, no one knows where Bitcoin’s price is headed. It might continue rising straight through the halving. But if history repeats and Bitcoin follows its pre-halving pattern, we could see a notable decline as the April 2024 halving approaches.
👉 Explore real-time market analysis
Frequently Asked Questions
What is Bitcoin halving?
Bitcoin halving is an event that occurs every four years, reducing the reward miners receive for validating transactions by half. This decrease in supply often leads to increased scarcity and has historically influenced price increases.
How does dollar-cost averaging (DCA) work with Bitcoin?
DCA involves investing a fixed amount of money at regular intervals, regardless of price fluctuations. This strategy reduces the impact of volatility and lowers the average cost per unit over time, making it ideal for long-term Bitcoin accumulation.
Could a spot Bitcoin ETF affect market volatility?
A spot Bitcoin ETF could attract institutional investors, potentially increasing market liquidity and stability. However, short-term volatility might persist due to speculative trading around the approval and launch phases.
What risks are associated with leveraged Bitcoin trading?
Leveraged trading amplifies both gains and losses. Excessive leverage can lead to significant financial loss, especially in Bitcoin’s volatile market, where sudden price swings are common.
How should beginners approach investing in Bitcoin?
Beginners should start with thorough research, invest only what they can afford to lose, and consider using a DCA strategy. Avoiding leverage and focusing on long-term holding can help manage risk.
Is now a good time to invest in Bitcoin?
Market timing is challenging. While current prices may be high, long-term investors often benefit from consistent investing rather than trying to predict short-term movements. Always assess your risk tolerance and financial goals first.