Blog

With the fourth Bitcoin halving just around the corner, let's take a look at some basic facts and Bitcoin's past and speculate on where the cryptocurrency might go from here.

First of all, this blog post is not intended as investment or financial advice. Cryptocurrencies are extremely volatile and investments can potentially lead to high losses.

The Birth of Bitcoin: Satoshi Nakamoto's Vision

Bitcoin has been in existence since 2008. It was introduced by an individual or group of individuals using the pseudonym Satoshi Nakamoto. Nakamoto published a whitepaper titled 'Bitcoin: A Peer-to-Peer Electronic Cash System,' which described the fundamental concepts and mechanisms upon which Bitcoin is based.

The main goal of Bitcoin was to create a digital currency that operates independently of governments or financial institutions and can be transferred directly between users over the internet. Bitcoin is based on a technology called blockchain, which records transactions transparently and securely.

The first Bitcoin software was then released in 2009, and the network was launched.

And Satoshi Nakamoto disappeared a few years later. He decided to step back and focus on other things. On April 23, 2011, he then sent a final message to the early Bitcoin developers before withdrawing from public view.

The true identity of Satoshi Nakamoto remains a mystery to this day.

Bitcoin's Deflationary Design

Satoshi Nakamoto limited the total number of Bitcoins that will ever exist to 21 million. Unlike fiat currencies, where central banks control the money supply and can print new currency units, Bitcoin follows a predictable and deflationary emission schedule. This limited supply and the algorithmic emission model of Bitcoin create a certain level of scarcity and stability, making it inflation-proof. 

Additionally, the Bitcoin halving also contributes to a deflationary effect, where the rate at which new Bitcoins are generated is halved. This helps to further tighten the supply and increase the value of Bitcoin in the long term.

The Decentralized System of Bitcoin

Unlike traditional fiat currencies controlled by central banks, Bitcoin operates on a decentralized system. Since Bitcoin is operated on a globally distributed network of computers (Blockchain), there is no central authority that can issue or control the currency. And because there is no central authority that can control Bitcoin, the currency cannot be censored or seized. Users also have full control over their coins as they are not reliant on banks. All transactions are public and visible to everyone on the Bitcoin blockchain - and cannot be reversed or falsified. The integrity of transactions is ensured, and there is no possibility of fraud or manipulation.

Bitcoin Mining

Bitcoin mining is a process in which new bitcoins are created and transactions are confirmed on the Bitcoin blockchain. The basic concept is similar to gold mining, but it is digital.

In simple terms, Bitcoin mining works like this:

People send bitcoins, and these transactions are collected. The miners verify these transactions to make sure they are legitimate. The verified transactions are combined into blocks. Each block is like a page in a book waiting to be added to the blockchain.

The miners compete to solve a mathematical problem called "proof-of-work". They have to find a special number that matches the hash of the block. This requires a lot of computing power and luck. The miner who solves the problem first is allowed to add the new block to the blockchain. As a reward, they receive new bitcoins and transaction fees.

As soon as the new block is added, the blockchain is updated and everyone in the network agrees that the transactions are valid. The information is now public and permanently stored.

This process is repeated continuously, and miners are constantly competing to find new blocks. 

Approximately every four years, the reward for mining is halved, a process known as 'Halving,' and the difficulty of the mining process adjusts automatically to ensure that new blocks are found approximately every 10 minutes.

Bitcoin Halving

Bitcoin Halving is a programmed event that is automatically set in the Bitcoin protocol. According to this plan, every 210,000 mined blocks, a Halving occurs. Since the Bitcoin blockchain has a fixed block time of approximately 10 minutes, this happens roughly every four years.

As the total number of Bitcoins that will ever exist is limited to 21 million, the Halving ensures that reaching this upper limit occurs gradually and over an extended period, specifically until around the year 2140. This ensures a sustained distribution of new Bitcoins over decades.

The Impact of Halving on Bitcoin Price

Historically, each Halving has led to a price increase as it reduces the inflation rate and the supply of Bitcoin.

The first Halving occurred on November 28, 2014, when the Bitcoin price was $12. The second Halving took place on July 9, 2016, with the Bitcoin price at $670 on the Halving day. During the third Halving in May 2020, the price was $8,787. The fourth Halving is imminent in April 2024, and the Bitcoin price is currently around $70,000.

After each Halving, there has always been a very bullish phase, with the price steadily rising. However, after a certain period, typically about 800 to 1100 days after the Halving, there have also been significant downward corrections. Overall, the cryptocurrency price is highly volatile, but the trend is upward.

Whether this will be the case for future Halvings is not guaranteed. The predictions for the Bitcoin price after the Halving in the coming years currently look like this:

• Negative Forecast: There could be a decline in the Bitcoin price as some miners may sell their holdings to cover operating costs. Some experts predict a drop to $30,000 or even $20,000.

• Realistic Forecast: It's possible that after the Halving, there will be another brief correction followed by a moderate price increase in the coming months. There is no guarantee, but there is a possibility that the price could rise to $100,000 or more in the next few years.

• Positive Forecast: In the crypto world, nothing is impossible, and a strong increase in the Bitcoin price after the Halving is also feasible as the decreasing availability leads to scarcity and times are very bullish. Some enthusiastic analysts predict a short-term increase to $200,000 and beyond. Due to the deflationary properties of Bitcoin and its potential as a global store of value, some experts believe that Bitcoin could be one of the most valuable in the next few years.

I would like to reiterate that this is not intended to be investment advice or a recommendation to buy Bitcoin on my part. In the worst case scenario, you could lose your entire capital, as there is never a guarantee of how prices will develop.

Investment Strategies in Bitcoin

HODL - Hold On for Dear Life
These users often buy Bitcoin at regular intervals and hold on to it regardless of price fluctuations. Even during major corrections, as has already happened from 70k to 20k, they hold on to their Bitcoins and buy more when prices drop. They believe in the potential of Bitcoin and recognize that fiat currencies have no sustainable future and are continuously losing value. So far, the price has always recovered after bearish phases and has continued to rise in every bull market. One advantage is that there are currently no taxes on Bitcoin, unless it is exchanged for fiat currency (although this varies from country to country). With wider global acceptance of Bitcoin, it could eventually become a generally accepted means of payment.

Buy Low and Sell High
The principle of buying during price fluctuations and selling at highs is another strategy that many consider. After all, fiat money in the account is primarily usable for daily life. Additionally, there's the opportunity to acquire more Bitcoins at lower prices with the profits made. The challenge is identifying the right time to sell at the peak, as the crypto market is very volatile. There's also the risk of missing the ideal entry point by waiting too long and either buying at the wrong time or not buying at all. However, through in-depth market analysis and forecasts, higher returns can be achieved than through hodling alone.

Stay Flexible
An alternative strategy could be to create a savings plan and regularly invest in Bitcoin. Through these periodic investments (Cost-Average-Effect), one acquires Bitcoin at different prices depending on whether the price is high or low at that time. In the long run, this results in an average price. With a strong belief in the future of Bitcoin, this strategy can lead to significant gains. Additionally, by simultaneously monitoring and analyzing the market, further Bitcoins can be acquired during price fluctuations. If a larger correction pattern emerges, profits can be converted into fiat currency and reinvested at a new, lower entry point.

Have an Appropriate Exit Strategy

If you don't belong to the All-Time Hodlers, consider a suitable exit strategy before investing! 

You could base it on these three factors, for example, when you sell: Price Trigger - Time Trigger - Event Trigger.
If any of these three factors occur, then you sell.

• Price Trigger: When the price of Bitcoin reaches a certain amount, such as $150,000 or $200,000, it's time to consider taking profits.

• Time Trigger: Historically, there has been a downward trend after certain periods following the halving. Considering this possibility, it might be wise to realize profits at a certain point in time. This could be, for example, the end of 2025 or mid-2026.

• Event Trigger: Political decisions, like the US election, or the buying and selling of Bitcoin by major companies or prominent individuals can influence the market. These events often lead to strong short-term volatility. You can take advantage of this volatility to realize profits and later buy back at lower prices.

The key point is: The drop will come. Bitcoin will go through another extreme downtrend, so don't miss the chance to exit in time. Tip: You don't have to convert directly into fiat currency. You can also swap into stablecoins.

Does Investing in Bitcoin Still Make Sense Now?

Many are interested in buying Bitcoin but hesitate because they believe it's too late. This thought has occurred to many when the Bitcoin price was at $1,000, then at $20,000, then at $50,000, and now at $70,000.

Of course, there's no guarantee of further growth, and in the worst-case scenario, there's the risk of losing a significant portion of your investment. However, if the price continues to rise, you might regret not getting in now.

And what some don't know: You don't have to buy a whole Bitcoin. You can also buy a fraction of a Bitcoin, like 0.05 BTC or 0.1 BTC, depending on how much you want to invest, and then buy more over time.

Projected Days Until the Next Halving

Don't expect an immediate increase in the value of Bitcoin once the halving countdown expires. Often, the value drops shortly after the halving. Historically, it has typically taken about 100 days after the halving for the price to rise. And remember: Just because this has frequently been the case in the past, it is not a guarantee for future developments.

Closing Words

The decision of whether and how much to invest in Bitcoin is up to each individual. Educate yourself, invest only what you can afford to lose, and be mindful of the market's volatility. Everyone must choose their own strategy and assess the risks and opportunities. Personally, I believe that the story of Bitcoin is far from over, and I'm definitely moderately invested.