Prediction: Bitcoin to make big moves before its next halving in 2028. Here are 3 potential scenarios

It’s been almost five months since Bitcoin (BTC -0.13%) the halving took place in mid-April, and it’s fair to say that things didn’t go according to plan. Shouldn’t Bitcoin have skyrocketed after the halving — when the reward for mining new coins is halved — and hit a new all-time high? Unfortunately, Bitcoin fell instead and is now trading near $57,000, which is 10% lower than it was in April.

So where does Bitcoin go from here? Here are three potential scenarios for Bitcoin in its current halving cycle, which is expected to end in March 2028.

The historical scenario

If you believe that history repeats itself (or at least rhymes, as Mark Twain said), then it is likely that Bitcoin will follow much the same pattern as the previous three halving cycles in 2012, 2016 and 2020. Based on historical evidence, Bitcoin follows a very defined pattern in each halving cycle, which the Wall Street investment bank Morgan Stanley (MISS -0.40%) refers to the “four seasons of cryptocurrency”.

The cycle begins with a gradual rise, followed by a very sharp rise as Bitcoin seeks a new all-time high. As investors flock to Bitcoin and the media joins the cryptocurrency, it leads to intense froth and speculation, followed by an inevitable crash in value. The end of the cycle is a crypto winter that can last up to 12 months. But then the next halving occurs and the cycle begins again.

Thus, in this scenario, we can expect Bitcoin to rise for 12 to 18 months after the halving as it rises to a new all-time high. Given that the halving took place in April, this means that Bitcoin should reach a new all-time high by the end of 2025. For example, investment firm Bernstein believes that Bitcoin could reach $200,000 in 2025.

But from there, Bitcoin will likely experience extreme volatility as it tries to push even higher. At some point, the price of Bitcoin could crash — just like in 2022 — as investors sell their shares and lock in their profits.

Ark Invest’s Cathie Wood analyzed the data and concluded that Bitcoin is particularly prone to sustained declines of 77% or more. So if Bitcoin manages to reach a new high of $200,000 by the end of 2025 and doesn’t go up at all, we could be looking at a Bitcoin price of just $40,000 in 2028. But then Bitcoin will start to rise again the next one approaches the halving cycle, and analysts will once again predict new all-time highs for Bitcoin.

Best case scenario

In the best case scenario, Bitcoin will lose some of its volatility and become much more predictable in terms of future price performance. Instead of wild swings and spins, there is a steady march toward a new all-time high.

That might seem unlikely given Bitcoin’s historical record as a volatile asset, but consider all the money pouring into Bitcoin via new Bitcoin exchange-traded funds (ETFs). The thinking here is that inflows into these new ETFs will help support Bitcoin’s price and absorb any selling pressure. At the same time, more buy-and-hold institutional investors will enter the crypto market and will be less likely to try to profit from short-term price fluctuations.

Image source: Getty Images.

If you hope that Bitcoin will eventually reach $1 million by the year 2030 — which is what some analysts are now predicting — then Bitcoin needs to generate annual returns of 75% or more. This is the figure Cathie Wood used in her original $1.48 million price projection for Bitcoin. In short, Bitcoin needs to grow by 75% every year from now until 2028, and only then will there be a path to $1 million for Bitcoin by the next halving.

Given that Bitcoin generated annualized returns of 230% over the 10-year period between 2011 and 2021, and generated returns of 150% last year, 75% may not be as heroic an assumption as it first appears. However, Bitcoin is only up 31% year-to-date, so it will take a huge year-end rally to get us there in 2024.

Worst case scenario

The ultimate worst case scenario, of course, is that Bitcoin goes to zero. Some investors are still convinced that Bitcoin is nothing more than a speculative bubble and that it offers no intrinsic value. At some point, even long-time Bitcoin bulls may decide to abandon their holdings, and that could lead to a long and tragic price decline as we head into the next halving in 2028.

While I personally do not subscribe to this view, there is certainly a fair amount of political and regulatory risk. While some politicians are pro-crypto and try to establish a regulatory framework in which Bitcoin can flourish, there are many more politicians who are anti-crypto and still see Bitcoin as something that is only good for money laundering and circumvention international sanctions.

Buy Bitcoin for the long term

Trying to time Bitcoin market movements is a fool’s errand. Instead of buying low and selling high, you will likely end up buying and selling lower.

A much better strategy is to simply buy and hold Bitcoin for the long term. By the time the next halving occurs in 2028, you might be pleasantly surprised by how much Bitcoin has appreciated in value.