If history is any guide, the halving event on April 19 could lead to a new bull market cycle for Bitcoin.

On the night of April 19th, the long-awaited Bitcoin (Bitcoin 0.89%) finally halved. Crypto investors around the world celebrated, and for good reason. There have been three previous halving events, and each resulted in a new bull market cycle for Bitcoin.

So is the reduce by half Will it make the price of Bitcoin soar again this year? I think so, and here’s why.

Bitcoin has its own monetary policy

Many investors may not realize this, but Bitcoin was created as a reaction to the 2008 financial crisis. Satoshi Nakamotothe pseudonymous creator of Bitcoin, blamed irresponsible fiscal and monetary policy for the crisis and sought to create a new type of digital asset that would be “sound money”.

With this in mind, Nakamoto incorporated the unique halving mechanism into Bitcoin’s original algorithm. The halving occurs after 210,000 blocks have been added to the Bitcoin blockchain, and this occurs approximately once every four years. Once block 210,000 is added, the mining reward for adding new blocks will be halved.

Image source: Getty Images.

Another way to think about this is that Bitcoin is the only asset in the world with its own monetary policy. The halving mechanism carefully controls how many new Bitcoins can be created at any given time. It also imposes a hard limit on the amount of Bitcoin that can be created, which is 21 million coins.

All of this is done to make Bitcoin as resistant to inflation as possible, a feat that even the most talented central bankers have never fully mastered. According to Coinbase Global (NASDAQ: COIN), Bitcoin is now a “programmatically disinflationary asset.” In other words, Bitcoin is literally programmed to resist inflation. So if you’re looking for a long-term store of value, Bitcoin is it.

Bitcoin Soared in Recent Halving Cycles

The second reason I am buying Bitcoin is because there is a very high probability that the value of Bitcoin will rise after April 19th. There have been three previous Bitcoin halving cycles, and in each of them, Bitcoin reached a new all-time high. . Some of the gains were truly surprising. For example, in the previous halving cycle, Bitcoin soared from $10,000 in May 2020 to $69,000 in November 2021.

Of course, past performance is no guarantee of future performance, so there is a chance that Bitcoin’s value will not rise as much this time around. Coinbase recently modeled the results of three previous halving cycles and found that the effect of each halving appears to be diminishing over time. This makes sense, as we are getting closer and closer to the 21 million cap, with 19.7 million bitcoins currently in circulation.

But this time there is something very different with the fourth Bitcoin halving, and that is the recent introduction of the new spot Bitcoin ETFs. This introduces an entirely new source of demand for Bitcoin and will likely help support the price of Bitcoin if there is any selling pressure after the halving. In fact, some crypto traders think that we are already facing a potential “supply squeeze” in terms of available Bitcoin, and the halving could force the price of Bitcoin higher, simply based on supply and demand.

All of this leads me to think that we will have a similar type of price dynamics to what we have seen in previous Bitcoin halving cycles. According to Coinbase, Bitcoin rose 923% in the six months after the first halving, 37% in the six months after the second halving, and 82% in the six months after the third halving. Therefore, it is certainly possible that Bitcoin will surpass the $100,000 level at some point this year. Given Bitcoin’s current price of $65,000, this would imply an upside of approximately 50%.

How much higher can Bitcoin go?

As Bitcoin becomes increasingly popular, it should begin to behave more and more like a traditional financial asset. This means less volatility, more correlation with stocks and bonds, and greater dependence on prices on the general macroeconomic environment. As a result, there may be less explosive upside than we are used to seeing with Bitcoin in previous halving cycles.

While Bitcoin may no longer be able to reach 100x or 1,000x in value as easily as it once did, it should still be able to increase 10x in price over the next decade. And that could be a conservative estimate. Cathie Wood of Ark Invest now believes that Bitcoin will surpass the $1 million price level sometime before 2030. So if you are thinking about investing in Bitcoin, buckle up and enjoy the ride.

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