So what happens now? To answer that, I think it’s helpful to remember that bitcoin is like any other asset, in that it responds to the dynamics of supply and demand.
West Texas Intermediate (WTI) crude hit $140 per barrel in June 2008 when it was believed that oil exploration had peaked. But the U.S. fracking industry changed the game, allowing crude to be extracted from areas that were previously unattainable. Global oil prices collapsed in 2014 as U.S. production ramped up, and today WTI is trading just under $30 per barrel, about 80 percent off its record high.
Gold prices have benefited from the fact that we’re close to exhausting the world’s gold deposits, or at least those that can be feasibly developed using current mining technology. Short of a breakthrough in a similar “fracking” process, producers are looking at increasingly less reward in mineral output for the time, money and effort that they spend digging the metal out of the ground.
Sound familiar? It should, because bitcoin prices have followed the same trajectory. In the months following the first and second halvings, bitcoin prices surged as it became abundantly clear that at some point in the near future, new bitcoin issuances will come to a halt. Time will tell if the same will happen this time, but I’m very bullish.
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