Bitcoin is behaving very differently this cycle

In Bitcoin’s 13-year existence, as long as you held your Bitcoin for four years, you’d be up on your investment — a seemingly random number that investors can thank the Bitcoin halving cycle for.

But 2022 is not like any other year…

Approximately every four years, the amount of Bitcoin rewarded to Bitcoin miners is cut in half (a.k.a. the Bitcoin halving) — decreasing the supply of Bitcoin entering the market.

• After each of the past three halvings, crypto prices would rise significantly, but in each subsequent halving, the size of $BTC’s rise would decrease.
• The last one was on May 11, 2020, and $BTC was up ~660% between this date and $BTC’s 2021 peak. $BTC’s return was ~2,904% in the cycle before (2016).

In past cycles, $BTC would never drop below the previous cycle’s peak price, but we’re close to breaking this trend. According to Bloomberg, $BTC peaked at ~$19,511 in the last cycle — and now we’re only 8% away from reaching this level.

Predictions: How far can Bitcoin drop?

None of the past halving cycles landed on a period with both rising inflation and interest rates. Macroeconomic conditions are the worst in decades — comparable to the 2000 dot-com bubble.

Macroeconomist and tech investor Tascha Che — thinks this may be crypto’s dot-com moment and that markets can fall another 50%.

• Per Swan Bitcoin Analyst Sam Callahan, $BTC fell over 80% from its peak in the last crypto cycle (Decrypt).
• An 80% drop this time would imply $BTC falling to $13,800 (~35% drop from current levels).

Per Nuveen Chief Investment Strategist Brian Nick, “Bitcoin trades like a penny stock” and “if it can move 20% in two days, it can move another 20% the next two days” (BBG).

Investors: Levels to watch

Per Arthur Hayes, former CEO of crypto exchange BitMEX, $1,000 $ETH and $20,000 $BTC are the price levels to watch. Investors can expect “massive sell pressure” if we hit these levels, based on Deribit options data.