The cryptocurrency market downturns of 2022 saw the likes of Bitcoin shed their value so drastically that even after months of steady recovery, many assets remain more than 50% adrift from their old all-time highs. Despite this, many crypto users are readying for a parabolic Bitcoin rally in 2025. Are they right to do so?
Bitcoin’s Historical Price Performance
The world of cryptocurrency is famously volatile, so it can be remarkably difficult for investors to identify trends and spot new bull markets emerging. Despite this, one cyclical event, the Bitcoin halving event, which occurs approximately every four years, stands out as carrying a major impact on the entire crypto ecosystem.
As we can see from Bitcoin’s Historical performance, the price rallies the cryptocurrency experienced in 2021 appear to be more of an anomaly, given how quickly their values had been wiped away through subsequent downturns.
However, analyzing trends like Bitcoin’s Stock-to-Flow (S2F) model paints a different picture. Should the trends of the past be repeated, it may be that investor optimism for 2025 is entirely justified.
Can Bitcoin Reach a Record Price?
Of course, it’s entirely possible for Bitcoin to reach a record price. At present, Bitcoin’s all-time high (ATH) valuation stands at around $69,045. However, following 2022’s widespread economic downturns, the world’s most famous cryptocurrency is far adrift from its former ATH.
At a value of around $30k, Bitcoin’s market capitalization would have to more than double just to recapture its former glories. So how can crypto users consider if a new ATH is achievable in such a short space of time?
For many, new price rallies are not only possible, but they also have the potential to surpass previous records far.
“If the upward trend continues until 2025, [Bitcoin] could reach $102,554.10 and BTC may profit,” writes Jason Connor, editor-in-chief at crypto analysis site Bitcoin Wisdom. “If the market experiences a decline, the goal may not be met. BTC is expected to trade at an average price of $93,763.75 and a low of $87,903.51 in 2025.”
While breaking the $100,000 barrier may seem astronomical, Cathie Wood’s Ark Invest anticipates even greater price movements over a more long-term basis.
According to Ark Invest, Bitcoin can climb to over $1 million by 2030.
Such an extraordinary price movement would need BTC to increase by over 4,000% in seven years. Still, for an asset that’s currently around 43,000% higher than its price of $67.81 recorded in July 2013, this may not seem like the giant leap it first appears.
One of the core reasons behind Bitcoin’s tendency to record meteoric price rises lies within its halving events. These pre-programmed mechanisms fundamentally alter the asset’s scarcity, making it rarer by design.
What’s Bitcoin Halving?
So, what is a Bitcoin halving? When Bitcoin was initially developed by its pseudonymous founder, Satoshi Nakamoto, it was deliberately created to uphold a level of scarcity that would preserve its value over time.
To date, only 21 million BTC will ever be “mined,” and more than 19.4 million Bitcoin have entered circulation.
Despite there only being 1.6 million BTC left to mine, it’s expected the final BTC will be minted onto the blockchain in the year 2140. It’s Bitcoin’s halving events that will cause such a severe slowdown.
Bitcoin’s halving events “halve” the volume of BTC awarded to miners who mint the cryptocurrency by solving complex mathematical puzzles using vast amounts of computational power.
While the block reward for Bitcoin miners stood at 50 BTC when the cryptocurrency was launched in 2009, this reward was halved to 25 four years later in 2012. The most recent halving event saw the volume of Bitcoin awarded to miners drop to 6.25, and the next one, penciled in for 2024, will see rewards fall further to 3.125 BTC.
Why Halving Affects the Price?
Because halving events reduce the volume of BTC being minted by 50% every four years, the scarcity of the currency automatically ramps up, sparking a fundamental shift in the supply-to-demand of the token. This, historically speaking, has resulted in a trend whereby Bitcoin embarks on a price rally that culminates in a new all-time high value for the currency.
Observing Bitcoin’s stock-to-flow (S2F) model, which is built on the number of BTC available in the market relative to the volume being mined every year, we can see that Bitcoin’s price invariably rises in the months following a halving event, with new all-time high values recorded around the same time in the wake of the event.
With the coming Bitcoin halving event set for 2024, we can observe the S2F model anticipate price movements far in excess of $100,000 by 2025 should the correlation continue to cling to its price forecast.
Does this mean that Bitcoin will definitely be worth more than $100,000 by 2025? While this can’t be answered with certainty, to fail to reach a new ATH in the wake of its 2024 halving will be the first time Bitcoin has been unable to embark on a meaningful bull run following a halving since it was initially created.
Should You Invest Now?
Naturally, this begs the question, is it time to invest in Bitcoin before the halving? Although tangible trends clearly show Bitcoin’s form when it comes to post-halving price rallies, it’s also worth staying cautious.
Bitcoin’s most recent bull run in 2021 was weaker than first anticipated among S2F forecasts and was buoyed by a widespread boom period for tech stocks and shares driven by the release of government stimulus packages to support the Covid-19 pandemic recovery. This means Bitcoin’s most recent post-halving event boom may have coincided with other positive market trends.
As Bitcoin continues to win mainstream acceptance, its post-halving bull run power may weaken, with more long-term institutional holders paving the way for less volatility throughout the market.
So, yes, Bitcoin’s halving event is a justifiable cause for great market-wide optimism. But, as ever in such a new and chaotic economic ecosystem, nothing’s certain in crypto.
The information on this website does not constitute financial advice, investment advice, or trading advice, and should not be considered as such. MakeUseOf does not advise on any trading or investing matters and does not advise that any particular cryptocurrency should be bought or sold. Always conduct your own due diligence and consult a licensed financial adviser for investment advice.
