- Bitcoin’s price performance one year after the halving has comparatively been the worst on record, with percentage price appreciation falling short of previous cycles.
- This underwhelming rally has unfolded against a backdrop of heightened global economic uncertainty, with Trump’s tariffs playing a major role in this.
- The Economic Policy Uncertainty Index averages nearly triple its level from past cycles at this stage.
- Some perceive this as macro-economic conditions being the real underlying factor in Bitcoin’s price movements, rather than the traditional ‘4-year cycle’.
Despite Bitcoin’s price rising back above US$90,000 (AU$141,021) today, the data shows its price performance is lacking in comparison to this stage during previous ‘cycles.’
After previous halvings Bitcoin tended to strongly rally within the following 12 months. This is exemplified by data which shows a 7000% surge following the 2012 halving, a 291% following the 2016 halving, and a 541% surge following the 2020 halving.
While volatility for Bitcoin has reduced over time, this recent year post-halving has shown that Bitcoin has still clearly underperformed, even when excluding 2012 as an outlier year.
Why is Bitcoin Underperforming Against Previous Cycles?
As mentioned, Bitcoin’s volatility is expected to decrease over time, as Bitcoin becomes a more mature asset. However, the more direct underlying reason may be the backdrop of great macroeconomic uncertainty.
While several factors contribute towards this uncertainty, Trump’s erratic rhetoric and actions towards tariffs likely contribute significantly to this uncertainty, as he instigated what was essentially the beginnings of a global trade war. Trump recently paused the tariff increases, at least temporarily, for most nations, though much uncertainty remains surrounding tariffs and China.
Related: Despite Tariff Turmoil, Analysts Make Bullish Case for Bitcoin, Predict Rally Above US$100k Soon
According to the Economic Policy Uncertainty Index, macroeconomic uncertainty is at levels 3x higher than in previous cycles with an average score of 317. For context, during the same time period at 6 months post halving, the index averaged 107 in 2012, 109 in 2016, and 186 in 2020.
Bitcoin hasn’t been the only underperformer, with altcoins also failing to appreciate drastically in price when compared to previous cycles. Many cite the dilution in the number of altcoins available as the reason for this, while others believe it is a matter of patience for better market conditions and increased liquidity.
What Comes Next?
Speculation is still rampant regarding what may be next for the price of Bitcoin and altcoins. However, an increasingly friendly regulatory environment towards crypto gives signs of hope, should macroeconomic factors stabilise. Bitcoin has risen back above US$90,000 (AU$141,021), though whether this trend continues remains to be seen.
A growing perception is that the traditional ‘4-year cycle’ of Bitcoin is dead, with liquidity and macroeconomic factors now being the true driver of Bitcoin’s price action. This could be perceived as a sign that Bitcoin and crypto are evolving as an asset class.
Related: Saylor’s MSTR Buys 6,556 More Bitcoin as US ETFs Return to Inflows
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