With Bitcoin's fourth halving just days away, one thought keeps echoing in my mind. Bitcoin's halving combined with institutional adoption of Bitcoin is akin to throwing gasoline on a fire. In this post, I will lay out my thesis that these two factors are likely to lead to explosive returns in Bitcoin over the next twelve months.
Historically, the prior three halvings have led to sharp increases in the price of Bitcoin as we can see in the charts below. To understand why this happens, we must first remember that markets are governed by the laws of supply and demand. At your local supermarket, if the supply of eggs or milk were cut in half, as long as demand were to remain consistent or rise, prices would need to increase to account for the decline in supply. Now, when Bitcoin has its' halving, the mining reward is cut in half. This means that those who mine Bitcoin will be selling less when they eventually look to exchange their Bitcoin in order to take profits from their operation. In addition, as more and more people become interested in Bitcoin it becomes a self-fulfilling prophecy as traders begin to purchase Bitcoin prior to the halving in hopes it will rally just like it did in prior cycles.
The other part of the equation is the institutional adoption of Bitcoin. With the rise of Bitcoin ETFs, Bitcoin has moved from the wild west of finance into Wall Street. What was once thought of as only appropriate for drug dealers on the dark web, has now found itself instead the trading accounts of those with ROTH IRAs. Now, Bitcoin already has a limited supply. The influx of funds and institutions into the crypto space is likely to lead to enormous moves higher in the coming year. Remember, Bitcoin usually rallies after the halving without all the demand from institutional investors. Now, with all this demand coming into a market that already has supply issues, it is easy to see why we may just be approaching an extremely explosive situation.
Risk right. Sit tight.
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Full Disclosure: I currently own Bitcoin, Solana, and Ethereum.
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