Is there a huge opportunity to reap massive rewards on a Bitcoin purchase over the next few weeks to few months? I think there is a good case that there is. There is no need to rehash what others have already described in detail but the short, short version is as follows.
Approximately every four years the reward for mining Bitcoins is halved. The current reward is 25 Bitcoins for every “block” that’s discovered and in just a little over 3 days, that reward is projected to halve again down to 12.5. This halving will continue until the maximum upper limit of 21,000,00 Bitcoins is reached many years down the road.
Why does this matter?
I believe the best argument presented to date for the huge run up in Bitcoin from under $10-$12 in November 2012 to nearly $240 in early April 2013 was the halving of the Bitcoin reward that took place on November 28, 2012. Subsequently Bitcoin crashed back down to just under $68 before reaching a new high of $1,151 on December 4, 2013 only to crash again down to $176.50 on January 14, 2015. (For those interested, here is a CSV Bitcoin price data to date).
The bottom line is this, if you bought in before the last halving you made between 600% and over 10,400%, if your crystal ball was crystal clear. If you chose to hang on for the whole wild ride, you’re up approximately 6,100% as of the time of this writing!
Does this mean it will happen again?
Obviously not, but it seems like it might be worth risking at least some small percentage of your total net worth. It’s not every day such opportunities come along, at least not without the kind of nearly flawless foresight that virtually no mortal men possess.
Could there be other explanations and mitigating factors in the previous run up?
Of course, but for me personally, the best argument for the strongest mitigating factor in the previous run up in Bitcoin was the halving. It just makes perfect sense to me. Sure the halving is common knowledge for anyone that wants to search for it, but markets are neither smart nor rational. There are plenty of idiots involved in Bitcoin that understand very little about how Bitcoin works, and I’m betting, there are enough to move the market and significantly so.
Full disclosure: I own Bitcoins and I’m continuing to add to my stash.