The 2020 Bitcoin Halving Bull Run: Why This Cycle Is Different Than Previous

Whether you are a newbie or a veteran HODLer, one of the most anticipated and watched events in the Bitcoin world is the halving, which occurs approximately every four years when the production of Bitcoin is cut in half. Every 210,000 blocks mined, an automatic deflation is triggered, which is also the most important function built into the Bitcoin protocol that automatically reduces the amount of currency introduced into circulation.

Bitcoin Halving and the Subsequent Bull Run

In the months following each halving, we’ve seen a dramatic increase in the price of Bitcoin. Because the halving significantly reduces the amount of new BTC in circulation, it creates a shortage. It’s simple supply and demand economics.

For example, on the first halving date in November 2012, the price of one Bitcoin was around $11.50. Over the next 12 months, the price of Bitcoin rose to $270 in late April 2013.

Fast forward to the next halving in July 2016. The price of Bitcoin on July 9, 2016 (the date of the second halving) was around $650. Over the next 18 months, including many ups and downs, by December 2017, Bitcoin is now trading around $20,000.

Most people believe that Bitcoin halving events are the catalyst for subsequent market bull runs. After all, after each halving in 2012 and 2016, Bitcoin’s price appreciated by 12,000% during that time. An interesting fact about the first two halvings is that it took Bitcoin twice as long to experience roughly the same growth and price appreciation, with the second halving bull run lasting (1,067 days) in 2016, while the first halving bull run in 2012 lasted 513 days.

A key takeaway for many technical analysis experts is that after Bitcoin’s halvings, the bull runs have each time weakened a little, but have been longer than the previous one. Bitcoin’s third halving bull run, which just occurred in May 2020, will be a little longer than the previous one, but not as intense. Again, according to the experts one listens to in the Bitcoin space, Bitcoin’s price has been pegged at the top of the upcoming 2020-2021 bull run at a price between $120,000 and $288,000 (or higher). In this best-case scenario (based on a Bitcoin price of around $15,000 at the time of this writing, this would result in an ROI of anywhere from 8x to 20x. That doesn’t sound bad. But I’ll try to convince them that they’re wrong.

Why this bull run is different

PlanB’s Stock 2 Flow model has sparked a debate about Bitcoin’s growth prospects over the next few years. It predicts that Bitcoin’s price will be between $100,000 and $288,000 by the end of 2021. Like clockwork, Bitcoin’s price seems to track this model perfectly. I’m here to tell you that while brilliant, PlanB’s predictions will underperform because he fails to include important factors that make this cycle very different from the previous two.

PlanB’s Stock 2 Flow model predicts that Bitcoin will be priced between $100,000 and $288,000 by the end of 2021, and will exceed $1 million by 2025. However, Bitcoin’s bull cycle will be different this time around — very different .

This cycle will be impacted by an event no one could have predicted: COVID-19. The spread and consequences of the pandemic, along with other factors, have impacted the world (and Bitcoin) in ways we could never have imagined.

• Social lockdowns have caused businesses to close at an alarming rate.

• Unemployment has reached levels never seen in our lifetimes.

• Governments around the world are constantly printing fiat currencies to prop up their economies (driving inflation or hyperinflation),

• Interest rates have entered negative territory, pushing companies into value havens in record numbers.

• People don’t want to use physical currency (and the subsequent rapid and rapid adoption of cryptocurrencies),

• Companies are frantically dumping cash in unprecedented quantities in favor of Bitcoin as a hedge against inflation (explained in the following article)

• Mainstream adoption by companies and financial institutions such as MicrosStrategy, PayPal, and Square, as well as funds such as Grayscale and Fidelity,

• Average adoption for retail applications is at levels not even imagined a year ago, as people frantically hope that Bitcoin will retain its value while keeping inflation at bay.

• Entire countries are looking to Bitcoin to stabilize their economies

• The Bitcoin market in general has matured significantly compared to previous cycles, and

• With supply so scarce, the price of Bitcoin has been pushed to levels previously thought impossible.

These basic (but significant) factors have created a perfect storm for Bitcoin. Neither of the previous two halvings has had similar market conditions, with both dire economic conditions and unprecedented mainstream adoption. And it will only get better for Bitcoin. These factors are difficult to quantify in a spreadsheet.

So while many TA experts say the bull cycle we are entering today will be a little longer and not as strong, I say you are wrong. It will be longer, longer and stronger.

In fact, these “perfect storm” market conditions will bring something no one expects in Bitcoin. Not only will we experience a longer bull run than the previous two, but it will also last until the next halving cycle in 2024.

As MicroStrategy CEO Michael Saylor recently said: “Bitcoin is the greatest monetary athlete of our time. This superstar athlete is brilliant, mysterious, and volatile during their first decade of learning and mastering their craft. In their second decade, they crush everyone and everything in their path.”