As one of the most important narratives in the cryptocurrency industry, the Bitcoin halving has always been a remedy to boost market confidence. With the current bull market seemingly within reach, will this halving cycle follow the same rhyme as before?
Summary:
With the ever-changing “atypical bear market” in the crypto world, the “halving” narrative, which has never faded, has arrived. On April 20, 2024, the block reward will be reduced from 6.25 BTC to 3.125 BTC.
Introduction:
Every halving is a grand event for the crypto industry, especially the first two halving cycles of Bitcoin, which saw astonishing increases of tens of times (although there were short-term declines after the first two halvings due to the exhaustion of positive factors, followed by long-term upward trends). However, since the third halving in 2020, there have been significant improvements in the number of industry practitioners, market attention, and supporting infrastructure. Bitcoin is no longer confined to a niche product in the geek community, but has started to interact with more external factors.
Historical Halving Cycles:
To summarize briefly:
Before the first two halvings (2012, from 50 BTC to 25 BTC; 2016, from 25 BTC to 12.5 BTC), geeks in the industry were more concerned about the possibility of Bitcoin as electronic cash.
During the third halving cycle (2020, from 12.5 BTC to 6.25 BTC), the focus on Bitcoin shifted to its attributes as a payment tool, which sparked a series of debates (followed by the BCH fork, which was almost a top flow in the industry).
In the fourth halving cycle (2024, from 6.25 BTC to 3.125 BTC), with the approval of the Bitcoin spot ETF, Bitcoin has become an alternative asset, and traditional institutions and capital allocation have become the main theme.
Compared to the first two halvings, the third halving of Bitcoin also generated unprecedented enthusiasm. At the same time, the overall global political and economic environment during the third halving of Bitcoin also influenced its performance. In the macro environment, from March 12 to March 13, the two months before the halving on May 11, 2020, Bitcoin plummeted from $7,600 to $5,500, and then dropped to as low as $3,600, evaporating $55 billion in market value and causing over 20 billion yuan in liquidation, accurately realizing the “halving effect.” However, after the halving in May, the DeFi Summer ushered in a new round of bull market cycle, and Bitcoin surged to $60,000, nearly 20 times higher than the lowest point before the halving.
Bitcoin Ecological Variables:
In addition to the halving cycle, there are several new variables worth noting in the current Bitcoin halving cycle:
1. Transaction fee income: As the block rewards decrease, transaction fees will become the main source of income for block producers.
2. Approval of Bitcoin spot ETF and Bitcoin ecosystem development: With the approval of the Bitcoin spot ETF, Bitcoin has become an alternative asset, and the attention of traditional institutions and capital allocation has become the main theme.
Conclusion:
With the upcoming fourth halving, many things need to be reconsidered in the context of Bitcoin having experienced three halvings, with block rewards reduced to 6.25 BTC and over 19 million BTC already mined. However, with the new variables emerging in the Bitcoin ecosystem, such as the surge in transaction fee income and the development of Bitcoin Layer 2 solutions, it is necessary to adopt a new perspective to analyze the situation. The approval of the Bitcoin spot ETF will provide more confidence for the development of the Bitcoin ecosystem and increase market acceptance. Overall, the halving of Bitcoin can provide a more stable development environment for the ecosystem, avoiding the impact of extreme market conditions. As the native asset of the Bitcoin ecosystem, the steady rise in Bitcoin prices is beneficial for ecosystem development.
With the upcoming halving, which may be witnessed and experienced by most practitioners and investors for the first time, and the current market atmosphere gradually returning to a bull market, it is worth considering the future direction of the halving and this cycle of Bitcoin. Will it open a new bull market cycle? Can it achieve a 10-fold or more increase in value considering its current market size? Welcome to comment and exchange opinions.