Bitcoin quickly rose above $64,000 on February 29, close to its all-time high of $69,000. However, even at this high level, analysts at the traditional financial giant JPMorgan Chase & Co. published a pessimistic outlook on bitcoin, arguing that it will fall to $42,000 after the Bitcoin halving.
Recently, there have been many significant events in the crypto market, including the continued development of the Bitcoin ecosystem and the approval of spot ETFs. However, there is particular focus on the Bitcoin halving event a little over a month later. As a cyclical landmark event, historical Bitcoin halvings have often caused huge volatility in the market, and this event always seems to cause an uproar in the market.
For the Bitcoin halving event, whether it is this year or previous years, there will always be a variety of analyses and ** in the market. However, there are a number of factors to consider to determine whether the impact of the halving on the market is positive or negative, and whether it will lead to a larger bull market.
Countdown to the OKLINK halving.
Is the halving cycle theory "a sword in the end?"
The Bitcoin halving cycle theory uses historical bull and bear times to support the quadrennial halving cycle, but some people try to use a magnifying glass to find all kinds of details and leaks, trying to break the "Bitcoin halving cycle theory", so as to convince everyone that the cycle theory is unreliable. The Bitcoin halving schedule over the years is as follows:
In January 2009, the genesis block was generated, and the initial default block reward of the system was 50 BTC.
In November 2012, the halving height reached 210,000, and the reward after the halving was 25 BTC.
In July 2016, the halving height reached 420,000, and the reward after the halving was 125btc。
In May 2020, the halving height reached 630,000, and the reward after the halving was 625btc。
In May 2024 (expected), the halving height will reach 840,000, and the reward will be 3125btc。
In the crypto community, there is a phenomenon of selective recognition, where most people may choose to believe in their favor. Despite the lengthy analysis, many people may choose to ignore it outright or respond with a "too long to read" attitude, and then simply say "the analysis makes sense, don't analyze it next time". This phenomenon suggests that the crypto community may sometimes have a different attitude towards complex theories and analyses and be selective about information.
In the end, the discussion and analysis of the cyclical theory will have a positive or negative impact or a complete dependence on which one you are more willing to listen to and believe.
Halving vs meme
Expectations have been formed, whatever is done feels right, any news is interpreted as positive, and the market reacts accordingly.
The famous "Ding Crab Effect" has been present in a particular **. Every time a TV series starring Zheng Shaoqiu is released, investors will be terrified. The Ding Crab Effect is actually a typical manifestation of the herd effect, in which most people may choose to follow the herd for fear of going against the dominant view.
In contrast, Bitcoin's "halving effect" seems to be more logical and theoretical. As one of the key rules designed by Satoshi Nakamoto for Bitcoin, the halving event has been verified time and time again, constantly instilling confidence and anticipation.
In the crypto market, people have become accustomed to all sorts of bizarre events. Currently, many purely air-based meme coins are also wildly popular, not to mention the halving event with strong consensus. The market has become accustomed to the expectation of a special event every four years. It can be said that the current halving has become a kind of meme, as long as it is mentioned that the halving is coming, people's subconscious confidence will instantly rise again.
In fact, the crypto community and capital markets need a fuse to ignite FOMO sentiment. After each halving, the community actively provides bull market logic and various analyses, interpreting what happened as positive, and even constantly self-suggesting.
Even if the periodicity theory is regarded as a superstitious metaphysics, as long as enough people believe it, it can easily become a consensus, forming a knee-jerk judgment similar to the "biological clock", and triggering a trend.
Just as people have experienced a major positive spot ETF for more than half a year, but the market is often not influenced by rationality. People are more willing to believe in similar "laws" such as "good is bad".
Bitcoin Halving, Positive or Negative?
Looking at the market performance after the previous rounds of Bitcoin halving, we find that the crypto bull market is not entirely attributable to the halving itself, but is mainly supported by different factors such as the rise of the concept of digital **, the rise of blockchain smart contracts, and the landing of DeFi applications. The future market is full of uncertainty, and the Bitcoin halving over the years does not mean that it is immediately positive, in fact, in many cases, the market trend before and after the halving is showing the best trend. Therefore, the Bitcoin halving can only be regarded as an important fuse for the big **, rather than a factor that directly brings about a bull market.
To assess whether the Bitcoin halving will cause a big ** as usual, we need to consider the following variables:
Variable 1: Miner rewards decrease and production costs rise.
This, as JPMorgan analysts point out, is an important factor to watch. In simple terms, Bitcoin's halving means that the mining reward per block starts at 625 pieces reduced to 3125, and in the absence of a breakthrough increase in computing power, the cost of producing bitcoins for miners will rise significantly. JPMorgan analysts believe that this rise in production costs will have a negative impact on Bitcoin.
Every halving cycle has been suggested that halving will lead to higher costs for miners and may even lead to the withdrawal of some miners from the network, which may affect the stability of the Bitcoin network and may even lead to serious consequences. However, history has shown that the results of previous halving cycles are quite the opposite.
While many, including JPMorgan analysts, may have overlooked the revenue miners earn through transaction fees, the percentage of miners' revenue that comes from fees has decreased over the past three months, according to on-chain data. At the time of the inscription boom, fee income may have accounted for 40% of revenue, but now it is generally reduced to between 5% and 8%. If the Bitcoin ecosystem can't continue to thrive, and Bitcoin can't sustain itself, then the question of miners' declining income is really worth pondering.
Source: OKLINK
Variable 2: The rise of the Bitcoin ecosystem
The bottom-up development model of the Bitcoin ecosystem has surprised many, but in any case, it has given a new impetus to the digital Bitcoin, and people have begun to spare no effort to mine the value behind it. Perhaps beneath the surface of the water, there is an even greater gold mine. This expectation is illustrated by a graph posted by the Stacks project on social networks.
Variable 3: global recession, the dollar does not cut interest rates.
Although the emergence of spot ETFs has opened an on-ramp, the inflow of funds is key. Therefore, the real positive lies in the "water" policy of the dollar this year. Only in this case can the super-entry of a spot ETF reveal its value. When Bitcoin expectations are weak, the funds attracted by spot ETFs can also be lost at any time. In the event of a major global** crash, funds could be withdrawn from Bitcoin spot ETFs first.
Variable 4: Bitcoin begins to replace the hedging function of **?
On the other hand, Bitcoin is different from what it used to be. Driven by spot ETFs, the trend of Bitcoin as a global mainstream asset will gradually become prominent, and the safe-haven attribute of its digital ** will be highlighted. In times of recession and downturn, people usually choose safe-haven assets such as ** for risk hedging. Now, Bitcoin ETFs offer another option, and it is still unknown whether the funds will flow to Bitcoin ETFs.
Recent analysis has pointed out that the large inflow of funds into the Bitcoin spot ETF seems to be at the expense of the outflow of funds from the **ETF. In the first week of February, investors redeemed 8$5.8 billion, with total outflows totaling $3.2 billion as of last week.
Variable 5: Law failure, Bitcoin halving potential energy and declining influence.
There is a logic that when something is about to happen to everyone, the market tends to move in the opposite direction, causing most people to suffer from the harvest of capital.
In the past, there was a legendary story called "Five Poor, Six Absolute Seven Turnover", which circulated in Hong Kong from the 1980s to the 1990s, in short, it will start every May, and it will be significantly higher in June, but in July, it will appear.
With the repeated verification of this "prophecy" or "law", by the mid-1990s, some people began to try various methods to "prevent" and "fight" this phenomenon, and as a result, after some operations, this cycle appeared more and more early, and even lost its reference value.
Each Bitcoin halving round means a significant reduction in rewards, but the halving is also gradually shrinking, which means that subsequent halvings may no longer have the same huge potential and substantial impact as before. This mechanism contributes to the stability of the network and ** in the later stage, but the subsequent halving may no longer have the unprecedented influence as before, it becomes more of a "anniversary", and the next trend will depend more on the development of the "Bitcoin ecology".
Bitcoin blocks reward the pace and strength of each round of halving.
While some variables may not seem optimistic, and others are difficult to distinguish between bulls and bears, hopefully it will eventually tilt towards the good side, and when the trend is formed, everything will follow it.
Brief summary. Bitcoin's halving may never have directly triggered a bull market, but more like the "easterly" factor in "everything is ready and only the east wind is owed". The market is not a place where rational judgment is right and wrong, but a complex environment full of demand and logic. It no longer matters whether the cycle theory is still valid or not, because there is a strong demand and logic behind it.
In 2024, despite facing various mixed variables, the capital market can use a variety of narrative combinations, including the superposition of halving, ETF inflows, Bitcoin ecology, US interest rate cuts, and other logics. Against this backdrop, growth is likely to solve many problems, which may also make the cyclical theory a hot topic again.