The Bitcoin halving.

Or, put a different way, to underscore its significance:

THE BITCOIN HALVING.

What is it, really? Why should you care? What’s going to happen next?

We’re getting a lot of questions, so let’s run through what exactly is happening. Snout to tail.

First, the basics…

The Magic Number: 144

Right now, on average, around 900 new Bitcoins are currently mined daily. This number is an approximation based on the following facts:

→ Bitcoin mining rewards are halved every 210,000 blocks, which occurs approximately every four years, AKA the "Bitcoin halving."

→ As of April 2024, the block reward is 6.25 BTC per block. This means that every time a new block is added to the blockchain (approximately every 10 minutes), the miner who successfully added the block receives 6.25 new Bitcoins.

→ With 6.25 BTC per block and a block time of 10 minutes, there are approximately 144 blocks mined daily (24 hours x 6 blocks per hour).

(Therefore, 144 blocks x 6.25 BTC/block = 900 BTC/day.)

This week, that 6.25 BTC per block will be cut in half. Meaning, Bitcoin miners will begin mining only 3.125 BTC per block, or an average of 450 BTC per day.

We don’t know exactly when it’ll happen, but we have a good estimate: Between noon April 19 to noon April 20.

Now, you might be thinking, "Wait. Since it’s supposed to happen every 210,000 blocks, that should be easy to predict!" Well, my friend, you'd be right... in theory. But as with most things in life, reality is a bit messier.

You see, the time it takes for miners to "find" the next block and add it to the blockchain is supposed to be a nice, even 10 minutes.

But miners are a fickle bunch, and the amount of computational power they throw at the network is constantly changing. This means that the actual time between blocks can fluctuate.

All we can do is look at past data…

Which is like trying to predict the weather by looking at what you wore last Tuesday. Might be useful. Maybe even most of the time.

Until it’s not at all.

As it happens, when it comes to price data, it’s been pretty useful so far. Case in point:

Post-Halving Predictions

In the March 2024 issue of Altucher’s Investment Network, I wrote a “Pre-Halving Playbook” for crypto investors.

It consisted of five distinct phases of the Bitcoin halving cycle.

Phase 1: Pre-Halving Downside Period

Phase 2: Pre-Halving Rally

Phase 3: Pre-Halving Retrace

Phase 4: Post-Halving Re-Accumulation Period

Phase 5: Parabolic Post-Halving Uptrend

Of particular interest to us right now is Phase 3… the pre-halving retrace.

While it differs when the retrace takes place, there’s almost always a hefty dip before the halving.

In the 2020 cycle, for example, a 20% retracement occurred two weeks before the halving, while in 2016, a 29-40% pullback took place 28 days prior.

This retrace normally presents one of the last bargain-buying opportunities before the halving.

Although we don’t try to time the market (did you dollar-cost average today?)…

In March, we wrote: “As the Bitcoin halving approaches, the possibility of a bigger pre-halving dump cannot be ruled out entirely. “

And…

“While the January pullback may have been the pre-halving dump for this cycle, remain vigilant and prepare for more volatility in the days leading up to the halving event.”

This weekend was the kind of volatility we like to prepare for.

But what about phases 4 and 5?

Phase 4

To be sure, the Bitcoin halving does not immediately trigger a massive rally due to supply shock.

Historical data shows that the price often falls or moves sideways for months following the halving event.

In the 2012, 2016, and 2020 cycles, it took between 100 and 200 days after the halving for Bitcoin to reach a new all-time high.

BUT… this time is different.

Bitcoin's supply growth rate, which has been around 1.8% annually for the past four years, is set to drop to approximately 0.9% following the halving event in April. This reduction in supply growth will mark the first time Bitcoin falls below the supply growth rate of gold.

It’s more than just symbolic: This eclipse of gold comes at a time when the institutions are piling in.

With 15 million out of the total 19.5 million Bitcoin in circulation being held by long-term investors, or "hodlers," institutions will have to compete for a shrinking number of Bitcoins.

And it’s not just the US.

The rest of the world is moving in: Hong Kong just approved Bitcoin and Ethereum ETFs in the past week. There are over 180 countries in the world. More of them are coming.

Phase 5

Once Bitcoin has sufficiently re-accumulated and broken out from the re-accumulation range, it enters the parabolic post-halving uptrend.

This is the most exciting phase of the cycle, where Bitcoin can go ballistic. Extreme FOMO and price targets of $1 million or more are common during this phase.

Now, keep in mind…

As we navigate through the Bitcoin halving cycle, it's crucial to understand and anticipate these phases, while also understanding the new forces at play.

While the current cycle may be unique, the fundamental principles of patience, dollar-cost averaging, and maintaining a long-term outlook remain as relevant as ever.

By staying informed about market developments, investors can position themselves to capitalize on the opportunities that lie ahead in Bitcoin's ongoing journey to new heights.