Chamath Palihapitiya (founder and CEO of Social Capital) explains that if you really want to understand Bitcoin, you need to closely observe what happens to its price after each 'halving.' A Bitcoin halving is when the reward that miners receive for creating new Bitcoin is cut in half. Imagine you are managing an orange farm, and overnight, your trees only produce half as many oranges. Because fewer new oranges (or fewer Bitcoins) are brought to market, each unit will become scarcer and may be worth more.
He shares that after previous halvings, the price of Bitcoin often goes through a similar pattern. In the first month and the first three months after halving, most investors are confused and cautious. They are like market-goers looking around, wondering whether the price of oranges will go up or down. But from the sixth month to the eighteenth month after halving, the price of Bitcoin has historically tended to increase significantly. For instance, 18 months after the first halving, Bitcoin increased by 45 times. After the second halving, it increased nearly 28 times, and after the third halving, about 8 times. Even the lowest increase during those times is considered gigantic compared to the traditional market.
Chamath says this is important because aside from halving, Bitcoin is currently being 'commercialized' strongly through Bitcoin ETF funds. ETFs are financial products that allow investors to easily buy Bitcoin, just like buying stocks through a regular trading account. He believes that these ETFs could be a turning point that helps Bitcoin become mainstream, as people no longer have to worry about digital wallets or complex security keys.
He emphasizes that looking at average increases from previous cycles does not mean he is predicting the future. It is merely historical data, not financial advice. But if you take the average increase from the second and third halvings and apply it to the current Bitcoin price, you will see a tremendous potential for price appreciation.
Many countries with weak and depreciating currencies may start using Bitcoin alongside their national currency. Imagine you live in a place where the currency depreciates rapidly, such as your salary at the end of the year being worth only half. People in those areas might use their local currency for daily spending but use Bitcoin to store long-term assets, similar to buying gold bars or real estate to protect the value of money.
Finally, Chamath believes that if Bitcoin continues to rise in price as it has in previous cycles, it could gradually replace gold as the main place for 'store of value.' Combined with concerns about the US dollar losing purchasing power, he thinks this could create significant opportunities for investors and nations.
