After Bitcoin (BTC 0.02%) hit an all-time high of nearly $70,000 in November 2021, many believed that the original cryptocurrency had enough momentum to hit the six-digit mark of $100,000. Yet Bitcoin fell as fast as it rose, and has continued falling.
Since hitting that all-time high in 2021, Bitcoin is down more than 70%. Drops of this magnitude aren’t uncommon when bear markets and crypto winters arrive, but past data show that when these periods of price decimation end, increases can return just as fast as they left.
In Bitcoin’s history there have only been three years that haven’t produced a return of at least 48%. For Bitcoin to hit $100,000 in 2023 it would need to climb by 490%. That might sound impossible, but Bitcoin has made yearly returns of more than 490% twice in its history.
However, call me a skeptic, but I am not sure it can hit that mark that soon. To get a better idea of what Bitcoin might have in store for 2023, and if or when it could hit the $100,000 mark, we need to look at some patterns revolving around Bitcoin’s halving events.
Every four years, or 210,000 blocks that are added to the blockchain, Bitcoin undergoes an event referred to as a halving. When halvings arrive, they cut in half the reward that Bitcoin miners receive, thereby reducing the rate at which new Bitcoin enters circulation. So far there have been three halvings — November 2012, July 2016, and May 2020. Originally the miner reward was 50 bitcoins, but since then it has dwindled to just 6.25 bitcoins, and will fall to 3.125 sometime in May 2024.
Halvings paint a clearer picture
Surprisingly, when we plot the dates of past halvings on Bitcoin’s price chart a few things become apparent. First, let me disclose that these are averages and by no means are reasons to try and time the market.
Based on data from the last three halvings, Bitcoin’s price typically bottoms out, on average, when the next halving is roughly 1 1/2 years out. With the next halving roughly 18 months away, data suggest that we might have found a bottom.
In the past, Bitcoin has gradually put up modest returns from the bottom to the next halving. On average, Bitcoin reaches a price of 60% of its previous all-time high when the next halving arrives. That would put Bitcoin’s price in May 2024 at somewhere around $40,000. Still not a bad return, but that would mean there’s no chance of Bitcoin hitting $100,000 in 2023.
It’s my belief that if Bitcoin does ever hit the $100,000 mark, it won’t happen until sometime in 2025. The same data that we have been evaluating shows that a new all-time high is usually reached 1 1/2 years after the halving. Now there isn’t any clear pattern as to how high Bitcoin goes after the halving, but I would be willing to bet that it could go 30% higher than its previous all-time high of nearly $70,000, passing six figures.
So for optimistic investors hoping for a return to the euphoria of 2021, if past trends hold, then you will likely need to wait until 2025 before a new all-time high is touched. But that shouldn’t be seen as bad news. Rather, it should be viewed as an opportunity. With prices down more than 70% and the risk of further losses looking to be minimal, now could be a great time to gain exposure to Bitcoin in preparation for long-term appreciation. Remember, Bitcoin rewards the patient and consistent investor.
RJ Fulton has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.