New year, new goals, right? If you are looking to set up your cryptocurrency portfolio this January for long-term success, I believe there is one cryptocurrency that all investors should prioritize: Bitcoin (BTC 0.58%).
There's no reason to beat around the bush: Bitcoin (and all cryptocurrencies, for that matter) had a horrible 2022. Critics are once again dismissing the digital currency. However, if history has taught us anything, it is that this is where the most can be won.
I've been there, done that
In the 14 years of Bitcoin's existence, it has gone through about three bear markets; some might argue and say there have been four. Either way, the point is that Bitcoin is no stranger to drops of 70% or more.
From an all-time high of $1,147 in 2012, Bitcoin plummeted to $177 over the course of just over a year, a whopping 85% drop. After hitting another all-time high just shy of $20,000 in December 2017, it then crashed the following year to as low as $3,200, another decline of more than 80%.
Hindsight is always 20/20, but looking back at those earlier dips, the naysayers were out in full force, just as they are today, and yet Bitcoin still found a way to hit new highs.
Today we are in a similar position. Since its most recent high, Bitcoin has lost around 75%, and it seems more people are vilifying rather than applauding it for having gone so far that a price of $16,000 is cause for hysteria.
Up to this point, aside from some included percentages, my argument has been only loosely based on the data. Let's change that.
It's time to do some numbers
Why January could be one of the best times to buy Bitcoin has to do with its price behavior in and in between halves. Halvings are a mechanism in the Bitcoin code that halves the rate at which new bitcoins enter circulation. They occur approximately every four years, with the next one occurring in May 2024.
When we compare the price of Bitcoin with the dates of the last three halvings, some interesting trends emerge. First and foremost: Bitcoin typically bottoms when the next halving is about a year and a half, give or take a few months.
On that basis, now that we are less than 18 months away from May 2024, Bitcoin may be entering its most profitable time to buy. History shows that those who buy at this point in the halving cycle tend to earn the most.
Furthermore, on the date of each previous halving, the price of Bitcoin was roughly 50% of its previous all-time high. This is just an average, but if the same thing were to happen this time, that would put the price of Bitcoin at around $34,000 by May 2024, based on November 2021 of almost $70,000. This implies a gain of more than 100%.
Until 2024 and beyond
But the goal here is not to time the market; rather, it is to maximize the long-term advantage. Especially when the data shows that Bitcoin hits a new high about a year and a half after each halving.
Theoretically, if it holds for multiple iterations of this cycle, you will eventually be the envy of people for buying Bitcoin when it was only $16,000, as it is today.
You should by no means act or assume that all of this will play out exactly as it has in the past, but there are clearly trends and patterns in the data revolving around the halvings.
Will it still be true this time? We can hope so, but only time will tell. Until May 2024 rolls around, consider me a great buyer at these prices in January.
rj fulton has positions in Bitcoin. The Motley Fool has positions and recommends Bitcoin. The Motley Fool has a disclosure policy.
