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Bitcoin (BTC-USD) fell sharply after the 2022 Bitcoin Miami Conference, which brought together over 25,000 bitcoiners in South Florida to learn more about how the world’s oldest cryptocurrency will change the world forever.
It was nice a tough few months for bitcoiners since BTC hit all-time highs in November 2021. Recently, bitcoin has had a strong correlation with the stock market and we’ve witnessed a crypto sell-off alongside stocks over the past few months.
There are several global headwinds that have contributed to recent bearish trends, including:
- Rising inflation
- Russia-Ukraine War
- Outbreak of Shanghai Covid-19
- Higher fat yields
- Etc
If you bought Bitcoin during recent all-time highs, you’re probably wondering if BTC will rally to all-time highs again in 2022.
As much as I believe in Bitcoin, I don’t think 2022 will be a positive year for Bitcoiners. Historical trends suggest that the cryptocurrency will continue to sell off as low as $30,000 (or even lower) based on its current position in the bitcoin halving cycle.
It is important to understand that fiat currency is powered by the military and politicians, while Bitcoin is powered by math. Understanding how Bitcoin’s halving cycle works will help you pinpoint the best time to buy and sell your coins.
Keenan Mell wrote an excellent article on Bitcoin’s halving cycle, but I want to dig a little deeper into the specific reasons why Bitcoin will go down in 2022 and how you can benefit from this information.
Understand the 3 Phases of the Bitcoin Halving Cycle
When Satoshi Nakamoto wrote the Bitcoin Code, he wanted to reduce the supply of available Bitcoin over time to increase demand and prevent price dilution in a decentralized manner.
The first Bitcoin Genesis block produced a reward of 50 Bitcoins and this number is halved every 4 years (or 210,000 blocks).
Bitcoin Halving History (DeltecBank.com)
The next halving is at block level #840,000 or around March 2, 2024. Right now the current block reward is 6.25 BTC and we are currently sitting at block #731,533 as of the writing of this article.
Current Bitcoin block number (Coinmarketcap.com)
Bitcoin introduces a new block every 10 minutes, but how does this help predict the direction of Bitcoin’s movement?
Let’s take a look at the 3 phases of each Bitcoin cycle:
- Bullish uptrend after halving (green area)
- Bearish sell-off (red area)
- Accumulation and recovery towards the next halving (blue area)
Bitcoin Halving Cycles (SeekingAlpha.com)
The 4th halving started at block #630,000 so we are currently in the bearish trend of the bitcoin currency cycle. We will not reach the end of this current phase until bitcoin hits the 770,000 block height or around January 11, 2023.
Bitcoin could see its bottom in January 2023
From a historical perspective, bitcoin will continue to trend much lower throughout 2022 but could see its bottom in January next year.
Other Seeking Alpha authors have corroborated this claim, but recognize that most retail investors are unaware of the currency cycle. So many people put all their hopes and dreams into Bitcoin pumping every year, but that’s just not the case.
The top 2% of all bitcoin holders control almost 95% of the coins and are able to control price movements in the short term.
List of Bitcoin Rich (Bitinfocharts.com)
Don’t obsess over the short term, but mentally prepare for a major price drop.
Bitcoin could approach key support levels of $30,000
Bitcoin is currently trading at around $40,000, but I wouldn’t be surprised if BTC dropped as low as $30,000 in the next few months. We are currently in the down phase of the cycle and we are also dealing with increasing global headwinds.
MicroStrategy (MSTR) holds 129,000 Bitcoin with an average purchase price of $30,700 per coin, serving as tremendous support going forward.
MicroStrategy CEO Michael Saylor has onboarded thousands of institutional investors since 2020, and Wall Street is well aware of his entry price.
The good news is that Bitcoin has never fallen below its previous high in the previous cycle. Bitcoin reached $18,000 during the 3rd cycle, so we should not see a massive 50% sell-off based on previous historical data.
$25,000 is a possibility, but I expect many savvy investors to rush to buy the dip. By then most retail investors will have sold at a loss and only institutional whales will start accumulating. As much as I want to trade Bitcoin for profit, I still believe in forgetting about price and holding onto it for the long term.
Think in 4 year cycles
Bitcoin moves in 4-year cycles, so investors should consider, “Do I want to hold Bitcoin for at least half a decade or more?”
First off, you avoid paying capital gains taxes (for US investors) if you don’t sell and keep it simple. Historically Bitcoin has risen every 4 years, making higher highs and higher lows.
Documenting Bitcoin released a powerful tweet showing how much Bitcoin can rise when you think in 4-year cycles.
The tweet above shows 3 news articles where Bitcoin fell below key levels:
- $400 on April 10, 2014
- $4,000 on November 25, 2018
- $40,000 on January 10, 2022
Bitcoin could repeat history again in 2026 and we could publish news articles about BTC falling below $400,000. The point is, don’t let price action cloud your long-term thinking. Bitcoin is a wonderful store of value that has made many investors rich just by holding and doing nothing.
Conclusion
Millions of baby boomers should be preparing for a relaxing retirement, but are instead considering a return to work in old age.
Bitcoin offers Generation X, Millennials and Generation Z an alternative to relying on government and our employers in old age.
I firmly believe that bitcoin will reach over $400,000 by 2026 and surpass $1 million by 2030 as Bitcoin adoption sweeps the world.
Owning just a fraction of 1 coin in a secure cold storage facility along with your 401,000, IRA and other investments could represent a sizeable nest egg.
We live in an era of hyperinflation and it is too risky to rely solely on the S&P 500 and government going forward.
Do your own research and consider investing a percentage of your portfolio in Bitcoin to hedge against fiat currency uncertainty.
You may be frustrated now but will thank you later for showing patience and conviction as we move toward a global Bitcoin standard.
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