on the crypto
New year, new goals, right? If you want to set up your cryptocurrency portfolio for long-term success this January, I believe there is one cryptocurrency that should be every investor's priority: Bitcoin (quotation BTC).
There's no reason to waste your time: Bitcoin (and all cryptocurrencies, for that matter) had a horrible 2022. Critics are once again writing off digital currency. However, if history has taught us anything, it's that this is the time when there is the most to gain.
Already seen, already done
In its 14-year life, Bitcoin has gone through about three bear markets; some might argue that there were four. In any case, the point is that Bitcoin is not new to declines of 70% or more.
From an all-time high of $1.147 in 2012, Bitcoin has plummeted to $177 over the course of just over a year, an 85% decline. After hitting another all-time high at just under $20.000 in December 2017, it plummeted to $3.200 the following year — another drop of more than 80%.
Hindsight is always 50/50, but looking back on these previous crashes, the detractors were in full force – just as they are today – and yet Bitcoin has found a way to soar to new highs.
Today we find ourselves in a similar position. Since its last high, Bitcoin has lost about 75% and there seem to be more people decrying it than applauding it for getting so far that a $16.000 price tag is cause for hysteria.
Up to this point, aside from a few percentages, my arguments have only been loosely based on data. Let's change things.
It's time to crunch some numbers
The reason why January might be one of the best times to buy Bitcoin has to do with how its price behaves during and between halvings. These halvings are a mechanism in the Bitcoin code that halves the rate at which new bitcoins enter circulation. They occur roughly every four years, with the next one expected in May 2024.
If we chart the price of Bitcoin against the dates of the last three halvings, some interesting trends emerge. First and foremost is that Bitcoin usually bottoms out when the next halving is about a year and a half away, month plus, month minus.
On this basis, now that May 18 is less than 2024 months away, Bitcoin could be entering its most profitable time to buy. History shows that buyers at this point in the halving cycle tend to make more money.
Furthermore, on the date of each past halving, the price of Bitcoin was around 50% of its previous all-time high. This is just an average, but if the same were to happen this time around, the price of Bitcoin would settle at around $34.000 by May 2024, up from a value of nearly $70.000 in November 2021. This implies a gain of more than 100%.
Until 2024 and beyond
But the goal is not to time the market, but to maximize the long-term upside. Especially when data shows Bitcoin making a new high about a year and a half after each halving.
Theoretically, if you keep multiple iterations of this cycle, you will eventually be envied for buying Bitcoin when it was just $16.000, like today. There is absolutely no need to act or assume that all of this plays out exactly as it has in the past, but it is clear that there are trends and patterns in the data surrounding the halvings. Will it be like this again? We can hope so, but only time will tell. Through May 2024, consider me a strong buyer at these January prices.