Bitcoin started 2023 at $16,605. The market expectation at that time was bearish and there were analysts who predicted that the price will go down to $12K or $10K.

Although Bitcoin had its ups and downs in 2023 the bearish analysts were wrong as Bitcoin rose during most parts of the year to hit $34,154 on 26 October. After another pullback it closed the year at more than $40K.

If we look at the movement of the price of Bitcoin, we can see that it moves in cycles of 4 years that follows the halving that occurs once every 4 years. The date of each halving is not fixed nor is it at exactly intervals of 4 years.

Halving occurs each time 210K blocks of Bitcoin has been mined. Since the beginning of Bitcoin, this has taken roughly 4 years each time. The term "halving" Is because the number of Bitcoins received by miners is reduced by half each time a halving occurs.

The number of Bitcoins received by miners was initially at 50 and was reduced to 25 in 2012 when the first halving happened. At subsequent halvings in 2016 and 2020 the amount of Bitcoins awarded to miners was reduced to 12.5 and then 6.25 respectively. In the next halving which will take place in April 2024 the amount will be reduced to 3.125.

Each time a halving occurs the supply of new Bitcoins coming into the market as they are mined is halved. It is this reduction in supply that cause the price of Bitcoin to rise with each halving cycle. The price of Bitcoin does not increase linearly tied with the timing of the halving ie. it does not increase immediately after a halving occurs. Generally. It takes a while for the effect of the reduction in supply to be felt.

Another factor that affects the pattern of price changes is how the market tends to anticipate changes and price in ahead of the anticipated changes. This pricing in ahead is the basis of the saying "Buy the rumor and sell the news"

An example of this is how the price of Bitcoin moved with the approval of Spot Bitcoin ETF's. Before the SEC approved the ETF's prices rose in anticipation of the approval. After the approval and the ETF'S started operating, prices fell. But after the effect of the increase in demand of Bitcoin when institutional investors started buying is felt, prices started to go up. Based on  the 3 halvings so far, the pattern is as follows:

Price rally in anticipation of a halving but the rally will falter and there will be a period of pullback. The prehalving rally restarts and price increase again. After the halving prices consolidates and it has already moved up ahead of the halving. The effect of the reduction in supply accumulates as supply of new Bitcoin is less than demand. This causes the price to go up. This cumulative effect leads to a new All Time High 1 to 2 years after the halving. 

The cycle then repeats

Based on the above pattern we should be roughly in the period of pullback before the prehalving rally 

In what we have seen so far with the halving that will take place in April  2024. the price of Bitcoin is behaving very differently. 

Instead of the price pulling back we have prices rising strongly. 

It looks likely that a new ATH will be set before the halving occurs instead of at least 1 year after halving. 

WHY IS THE PRICE OF BITCOIN BEHAVING SO DIFFERENTLY FROM THE LAST 3 HALVINGS? 

SHOULD WE BE BUYING OR SELLING BITCOIN NOW? 

WHAT SHOULD WE DO POST HALVING? 

I look forward to your input on the above questions. 

I will make a follow up post to explain what I think is happening and what I intend to do.