Bitcoin's Halving Cycle Is Nearing Its Peak. Here's What to Expect in the Next 3 Years

It's the early fall of 2024, and it has been a big year for Bitcoin (BTC 0.22%), including a halving event in April and the approval of spot Bitcoin exchange-traded funds (ETFs) in January.

Bitcoin (BTC 0.22%) has had a big year in 2024, with the halving event in April and the approval of spot Bitcoin exchange-traded funds (ETFs) in January. Bitcoin bulls are expecting a significant price increase in the near future -- but what comes after the next presumed spike?

Let’s take a look at Bitcoin’s prospects in the next three years. How bad will the next crypto winter be, and is this a good time to invest in cryptocurrencies?

The fuel for Bitcoin's economic cycles

In an effort to control the digital currency’s long-term inflation, production of new Bitcoins becomes less rewarding over time. Miners are rewarded for auditing a fresh list of Bitcoin transactions, and thereby writing that data block in digital stone to secure it against future changes.

That reward started at 50 Bitcoins per confirmed data block in the first four years. Roughly once every four years, the reward is cut in half to lower the production volume. After the fourth so-called halving on April 19, 2024, a confirmed data block is worth 3.125 Bitcoin to the miner lucky enough to perform the last calculation.

At the same time, the difficulty of producing the right answer is almost always on the rise. Together, the difficulty increase and reduced rewards result in lower monetary rewards over time, while the costs of earning that reward soars higher.

Without the miners auditing Bitcoin’s transaction flow, the cryptocurrency would grind to a halt. Nobody wants a currency that won’t process value-moving transactions, so that would arguably be the end of Bitcoin as we know it. But the economics of running this increasingly expensive system depend on robust price increases over the years -- usually triggered by the halvings after a bit of a delay.

The story so far

So there’s a four-year cycle of Bitcoin price moves, starting with a large increase somewhere between six months and a year after each halving.

Now, every market is different, and the resulting chart always comes with unique quirks:

You’re looking at the fourth halving cycle now. It got started a bit early, setting all-time highs of $73,750 just before the actual rewards halving. That premature gain sprung from the launch of spot Bitcoin ETFs, which made the cryptocurrency available to new buyer types such as institutional investors and self-managed retirement plans. New money flooded into the Bitcoin market, boosting coin prices in the classic supply-and-demand balancing act.

About four months after the fourth Bitcoin halving, coin prices are down by 10%. It has been a rough ride with many twists and turns along the way, mostly based on the likelihood of the U.S. central bank’s lending rates going down again. Bitcoin is sensitive to these swings because investors see it as a high-risk investment. Anything that makes it harder or more expensive to fund Bitcoin investments will weigh on its dollar-based price.

Moreover, don’t forget that this cycle started from higher ground than usual. The pre-halving gains may undermine the incoming price gains. But I’m looking at uncharted waters here, so there’s also a chance that the spot Bitcoin ETFs just raised the pricing range in general. Only time will tell.

And on that note, I see nothing out of the ordinary. Bitcoin remains a riddle wrapped in a mystery inside an enigma, all protected by heavy encryption and expensive transaction audits.

The stage is set for an epic struggle. Classical master investors like Warren Buffett don’t see any lasting value in this digital currency. In the opposite corner of the crypto ring, all-in Bitcoin bulls such as MicroStrategy chairman Michael Saylor expect it to disrupt financial systems around the world. One side suggests a price target near zero dollars per coin; the other expects Bitcoin prices to reach $13 million in a decade or so.

My analysis points to a bullish outcome, but the halving-based gains grow smaller in every cycle, and there’s still no telling how the ETFs are affecting the process. With a wide margin of error, Bitcoin seems poised to double by the spring of 2026 after taking the usual detour to higher prices on the way there. The cryptocurrency does look like a solid investment right now, and I’d rather keep building my crypto portfolio for the long haul than attempt to catch the best week to sell it all in this cycle.

Another winter is surely coming, but Bitcoin should be perched far above today’s prices at that point. As always, patience is a virtue on Wall Street. Time in the market beats market timing, you know.