Five Things To Expect by the Next Halving in 2028

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By Matthew Hougan

It’s hard to maintain perspective when you follow bitcoin closely. There is so much that happens day to day that it can distract from the bigger picture.

But events like last Friday’s halving offer a good excuse to zoom out. After all, halvings occur only once every four years. We can ask: How much progress have we made since the last one?

The answer is: a lot.

Take price. Bitcoin has gone through four halvings, with its price rising significantly from one to the next:

• 2012: $13
• 2016: $639
• 2020: $8,475
• 2024: $68,982

Remarkable, no? Zooming out has a way of clarifying things.

The same is true of news. On a daily basis, crypto media is awash in worrying headlines. But pull back and crypto’s progress becomes clear. Consider some of the key events from the past four years:

• Bitcoin ETFs were approved in multiple markets, including the U.S.
• BlackRock and other major TradFi firms entered the market
• Coinbase went public
• Starbucks, Nike, Dolce & Gabbana, and hundreds of other global brands launched crypto initiatives
• Stablecoins became a $150B market
• AML/KYC compliance standards were applied at all major brokerages

Of course there have been setbacks—think FTX, Genesis, BlockFi, and so on. But from any perspective, we are a much larger, more mature, and more institutional industry today than we were in 2020. That’s why the price is up more than 700% in four years.

For this week’s CIO Memo, I’m going to zoom four years ahead to the next halving and call out five things I think we’ll see. Of course, the usual disclaimers apply: These are predictions, not guarantees, and they should not be considered investment advice. Still, it’s fun to think long-term for a minute.

Prediction 1: Bitcoin’s Volatility Will Decline 50%

Bitcoin’s volatility has been declining for years, but I think that decline will accelerate going forward. There are many reasons, but the primary one I’d highlight is the ETFs.

ETFs bring new types of investors into the bitcoin market—financial advisors, family offices, institutions, etc. These investors act differently than the retail investors who have dominated bitcoin to this point. On average, institutional investors are more likely than retail investors to rebalance their portfolios (selling high, buying low) and to make steady drip investments into the market (monthly, quarterly, etc.). This introduces countercyclical flows which could dampen volatility.

Prediction 2: 5% Allocations to Bitcoin Will Become Common in Target-Date Portfolios

One of the reasons I’m so bullish on bitcoin over the next few years is that the market is reflexive. If I am right that investment professionals will enter the market and help drive down volatility, that will make bitcoin more attractive to those same investors. As a result, I suspect we’ll see the “typical” portfolio allocation rise to the point where it is considered normal to have 5% or more of your portfolio in bitcoin.

It’s hard to qualify what makes a “typical” allocation, so I’d suggest looking more closely at target-date and target-allocation portfolios in the U.S. Bitcoin hardly exists in these wrappers today, but I think this will change in the next few years across ETFs, 529 plans, and 401k plans. And I suspect the more aggressive versions of these portfolios will target 5% allocations or more.

If that sounds unlikely, consider that we’re already seeing target-allocation funds pick up bitcoin allocations in certain markets like Canada, where Fidelity Canada’s All-in-One Growth ETF has a 4.1% allocation to bitcoin today.?

Prediction 3: Bitcoin ETFs Will Gather $200+ Billion in Flows

In the U.S. bitcoin ETFs have pulled in ~$12.5 billion in net flows since launching three months ago. That makes them the fastest-growing new ETF category of all time.

I think they’re just getting started. One reason why: ETFs are still not broadly available at national wirehouses like Morgan Stanley or Merrill Lynch. Institutions, meanwhile, are still beginning their due diligence. Both of these areas could represent major long-term sources of demand.

ETF history also supports the view that flows are just beginning. Net flows into gold ETFs rose year after year for seven straight years after the first one debuted in the U.S. in 2004. Watch for something similar in bitcoin ETFs.

Prediction 4: Central Banks Will Begin Allocating to Bitcoin

Central banks are big investors in gold, holding roughly 20% of all the gold that’s ever been mined. They’ve also been big buyers recently, accumulating more than 2,000 tonnes of gold in the past two years. That’s more than $100 billion in purchases.

I think they’ll start buying bitcoin before the next halving. Like gold, bitcoin is non-debt money—an asset whose supply can’t be expanded through borrowing. It also cannot be seized by a foreign government the way sovereign bonds can be (and have been recently). Bitcoin is also more functional than gold from a payments and settlement perspective. Those characteristics are increasingly attractive to governments in our increasingly fractious, multi-polar world, where countries like the U.S. are increasingly using financial tools as levers for foreign policy.

I’d note: There is also an element of game theory here. A major central bank adopting bitcoin as a reserve asset would be a game-changer for bitcoin and, I believe, would contribute to a dramatic increase in prices. Will one central bank try to front-run the others?

Prediction 5: Bitcoin’s Price Will Trade Above $250k?

While there are a number of factors behind bitcoin’s more than 100x return over the last two halvings, I’d argue the biggest reason has been bitcoin’s movement from a largely speculative asset to one with actual real-world utility. (For more on this, check out this recent CIO Memo.) What utility, exactly? Declining historical volatility, more sophisticated custody options, low correlations to stocks, ease of access through ETFs, and greater institutional adoption.

Over the next four years, I expect that progress will continue.

With the ETFs launched and gathering assets—and major Wall Street firms lining up behind bitcoin—I suspect the asset will continue to move further into the mainstream. At $250,000, bitcoin would be a $5 trillion asset. Could it go higher? Of course. But $250,000 would represent solid progress between halvings, and I think we’ll see at least that.

Risks and Important Information

No Advice on Investment; Risk of Loss: Prior to making any investment decision, each investor must undertake its own independent examination and investigation, including the merits and risks involved in an investment, and must base its investment decision—including a determination whether the investment would be a suitable investment for the investor—on such examination and investigation.

Crypto assets are digital representations of value that function as a medium of exchange, a unit of account, or a store of value, but they do not have legal tender status. Crypto assets are sometimes exchanged for U.S. dollars or other currencies around the world, but they are not currently backed nor supported by any government or central bank. Their value is completely derived by market forces of supply and demand, and they are more volatile than traditional currencies, stocks, or bonds.

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Crypto asset trading requires knowledge of crypto asset markets. In attempting to profit through crypto asset trading, you must compete with traders worldwide. You should have appropriate knowledge and experience before engaging in substantial crypto asset trading. Crypto asset trading can lead to large and immediate financial losses. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price.

The opinions expressed represent an assessment of the market environment at a specific time and are not intended to be a forecast of future events, or a guarantee of future results, and are subject to further discussion, completion and amendment. The information herein is not intended to provide, and should not be relied upon for, accounting, legal or tax advice, or investment recommendations. You should consult your accounting, legal, tax or other advisors about the matters discussed herein.