Bitcoin’s 2020 halving is a little over two weeks away, but what was going on during its last halving in July 2016? Times were certainly different for lots of reasons, but what was Bitcoin’s situation going into the halving, and can we draw any parallels to guide us through next month’s?
The Past is a Foreign Country…
It’s July 9, 2016. Barack Obama is in the White House (just), Harvey Weinstein is a respected film producer, and Bitcoin is sitting at $640. It has enjoyed a modest $210 increase over the year, but hopes are high that it can hit further highs following the halving that is due to take place in a matter of hours. The event will see the reward for miners drop from ₿25 to ₿12.5 per block, with many hoping that it can bring the good times back after a desolate 36 months.
July 2016 was in many ways a different world, from politics to pandemics, and Bitcoin was no different. Talk of $20,000 per Bitcoin was a distant dream, and one that only the hardiest believers were still enjoying, given that Bitcoin was still smarting from a two-and-a-half-year bear market.
Bitcoin’s Mammoth Bear Market
In November 2013, Bitcoin peaked at $1,145, since when a mammoth shakeout had seen off even the strongest of hands, exacerbated by the arrest and sentencing of Silk Road founder Ross Ulbricht in May 2015.
For many commentators in the mainstream media, the fall of Ulbricht and Silk Road was tantamount to a death sentence for Bitcoin. However, by the time the 2016 halving rolled around, Bitcoin had seen seven months of positive action that had got many believing that there was life in the beast post-Silk Road. And the halving was a big part of that.
Investor and entrepreneur Vinny Lingham predicted that the halving would help take Bitcoin back over $1,000 that year, after a 3-6 month consolidation period. He would turn out to be right on the latter count, but wrong on the former by 24 hours – Bitcoin crossed the $1,000 threshold again on the evening of January 1, 2017.
In terms of short-term price action, by the time the halving rolled around Bitcoin had already enjoyed a 72% run up followed by a 26% crash in the weeks before July 9. Apart from a quickfire 16% crash at the end of July, there was very little volatility following the halving, with the real action taking place the following year when Bitcoin raced to all-time highs.
Bitcoin is a Different Beast in a Different Place
This time around Bitcoin, and the indeed the world, is in a very different place. Bitcoin is more than ten times the price it was back then, and this halving isn’t coming off a two and a half year bear market.
In fact, we can’t even say we’ve had a pre-halving run up, unless you count its recovery from a 51% crash in March as a run up. The fact is things have been very different up to now, so is it too much to expect a post-halving consolidation followed by all time highs in 2021?