The return of ‘$50,000 Bitcoin’ and the meaning of crypto price patterns

It’s impossible, of course, to predict the exact price of any asset—let alone Bitcoin—one year out, but the point is that people who study this stuff claim the good times are coming back. They base their prediction on something called the “halving,” which occurs every four years or so and results in Bitcoin’s block reward—the jackpot you win for adding a new block to the blockchain—shrinking by 50%. This process saw the block reward drop from 50 to 25 Bitcoins in 2012 and, in April of next year, it will drop from 6.25 Bitcoins to 3.125.

According to the analysts, Bitcoin has hit an all-time high shortly after the past three halvings, and recent trends suggest this will happen again. The underlying logic here seems sound—if something becomes more scarce, the price should go up—but I’m not entirely sold. I’m skeptical of single-cause explanations (correlation doesn’t equal causation) and, per a recent report by Fortune’s Ben Weiss about the potential end of Crypto Winter, other analysts see the halving as a factor in Bitcoin’s recent upswing but hardly the only one.

On a broader level, I find myself asking what we can learn from crypto price patterns in the first place. A big reason for this is that there’s an established set of metrics for predicting the price of stocks or real estate, or the next recession, but not for crypto. Or more correctly, there are metrics but mostly exotic ones. Crypto traders like to share candlestick price charts and other technical insights, but not much in the way of data that is easy for most of us to digest.

I suspect this is partly because crypto is just so different from traditional markets. Blockchain analysts employ a different vocabulary and set of criteria than other financial eggheads, and, because they are typically invested in crypto on a personal and professional level, they may be prone to a bullish bias. Conversely, many in the traditional financial world are prone to embracing a bearish or outright disdainful view of the crypto sector—especially during downturns—even if they know nothing about it.

The upshot is that a lot of crypto price analysis can seem like voodoo, but it’s not necessarily wrong, and over time we are likely to see clear trend indicators emerge. For now, we have another chance to see if “halving” is one of these indicators. You can bet I’ll be revisiting this topic a year from now with more to say.

Jeff John Roberts
jeff.roberts@fortune.com
@jeffjohnroberts

DECENTRALIZED NEWS

Groups backed by Coinbase and Gemini will take part in a three-way auction this Tuesday that will determine who will take Celsius out of bankruptcy. (Fortune) 

Economic historian Niall Ferguson says chatter about the dollar’s decline is overblown, noting it is still dominant in global transactions and that changes in reserve currency occur very gradually. (Bloomberg)

A judge ruled against self-described artists who launched what they claim was a satirical version of Bored Apes NFTs, concluding the rival collection risked consumer confusion under trademark law. (CoinDesk)

The Securities and Exchange Commission’s recent claim that DeFi platforms fall within the ambit of the traditional exchange world led a lawyer at one global law firm to conclude the agency is “seeking to ban DeFi protocols in America.” (WSJ)

Tether has fully rebounded from last year’s crashes, partly because it is viewed by big traders as a reliable place to store money—which critics see as ironic given the opacity around USDT. (Bloomberg)

MEME O’ THE MOMENT

The crypto crowd’s view of Gary Gensler has not improved: