原标题：Bitcoin Halving. The Four Year Cycle Is Dead
Author: Jasper De Maere, Researcher at Outlier Ventures, Translated by: 0xjs@Golden Finance
Four months after the Bitcoin halving, we have witnessed the worst post-halving price performance to date. In this article, we will explain why the halving no longer has a fundamental impact on the price of BTC and other digital assets, the last time a halving had a fundamental impact was in 2016. As the digital asset market matures, it is time for founders and investors to move away from the concept of a four-year cycle.
Key points:
The 2024 halving is the fifth period of Bitcoin halving, and the BTC price has performed the worst within 125 days after the halving. The price fell by -8% compared to the day of the halving, while the average increase in the previous periods was +22%.
We believe that the last time the halving had a significant fundamental impact on BTC price action was in 2016. Since then, the size of BTC block rewards for miners has become insignificant against the backdrop of a maturing and increasingly diverse crypto market.
The strong performance of BTC and the cryptocurrency market after the 2020 halving is purely coincidental, as the 2020 halving occurred during a period of unprecedented capital injection around the world after the COVID-19 pandemic, with the U.S. money supply (M2) increasing by 25.3% that year alone.
Some people believe that the 4-year halving cycle still holds true in 2024, but the approval of the BTC ETF in January 2024 drove demand in advance, causing BTC to rise strongly before the halving. This statement is wrong. BTC ETF approval is a demand-driven catalyst, while halving is a supply-driven catalyst, so they are not mutually exclusive.
The price of Bitcoin has a significant impact on the broader market and, therefore, on founders’ ability to raise capital through equity, SAFTs, and private or public token sales. Given the liquidity that crypto brings to venture capital, it is imperative that founders understand the top-down market drivers to better anticipate funding opportunities and predict their trajectory. In this article, we unpack the concept of the four-year market cycle to lay the foundation for exploring the true drivers of the future of work. Debunking the four-year cycle does not mean we are bearish on the overall market.
Let’s first look at the BTC price performance before and after the halving in the past few cycles. It is obvious that within 125 days after the halving, the 5th cycle (2024) is the worst performing period since the halving, and it is also the only cycle in which the BTC price has fallen compared to the day of the halving.
Figure 1: BTC price performance before and after halving in different cycles
Source: Outlier Ventures
So what effect does the halving have on prices? In short, there are two main reasons.
Fundamentals: Bitcoin halving reduces new supply, creating scarcity, and when demand exceeds limited supply, prices may rise. This new dynamic also changes the economics of miners.
Psychological level: Bitcoin halvings enhance perceptions of scarcity, reinforce expectations of price surges based on historical patterns, and attract media attention, which can increase demand and push prices higher.
In this article, we argue that the fundamental driver behind BTC price action, the halving, has been overstated and has been irrelevant over the past two cycles. We will combine the numbers to demonstrate that the net effect of the halving is not enough to have a significant impact on BTC price or the broader digital asset space.
Initial observations - daily BTC block incentives
If you learn one thing from this article, it’s this:
The strongest argument for the halving’s impact on the market is that, in addition to reducing BTC inflation, it also affects the economics of miners, leading to changes in their fund management.
So, let's consider the extreme case where all mining block rewards are immediately sold on the market. How great would the selling pressure be? Below, the total daily block rewards received by all miners (in USD) are divided by the total transaction volume on the market (in USD) to assess the impact.
Until mid-2017, miners had an impact of more than 1% on the market. Today, if miners sell all of their BTC block rewards, they account for only 0.17% of market volume. While this does not include BTC previously accumulated by miners, it shows that as block rewards decrease and the market matures, the impact of BTC block rewards has become insignificant compared to the overall market.
Figure 2: Potential market impact if all miners sold their daily BTC block rewards
Source: Outlier Ventures
Review - Halving Impact
Before we go on, a quick recap. The Bitcoin halving is an event that occurs approximately every four years where the block reward for miners is cut in half. This reduces the rate at which new BTC are generated, thus reducing the amount of new supply entering the market. The total supply of BTC is capped at 21 million, and with each halving, the rate at which this cap is reached becomes slower. The period between each halving is called a cycle, and historically, each halving has impacted the price of Bitcoin as supply decreases and scarcity increases. All is illustrated in Figure 3.
Figure 3: Bitcoin halving dynamics, block reward, total supply and cycle
Source: Outlier Ventures
Bitcoin halving performance
Starting with what matters most to many of us, the impact on price performance, we see that the performance after the 2024 halving is the worst since BTC’s inception. As of today (September 2, 2024), BTC is trading about 8% lower than the halving price of $63,800 on April 20, 2024.
Figure 4: BTC price performance after each halving
Source: Outlier Ventures
“What will happen before the 2024 halving?” Indeed, we have experienced an unusually strong trend before the halving. Looking back at the performance 200 days before the 2024 halving, we find that BTC has increased by almost 2.5 times. This is almost the same as the second cycle, when BTC accounted for 99% of the total market value of digital assets, and the halving still makes sense.
Figure 5: BTC price performance 200 days before each halving
Source: Outlier Ventures
That being said, it’s also important to remember what happened during that time. In early 2024, we got approval for a BTC ETF, which has seen net inflows of 299k BTC since January 11, 2024, driving prices significantly higher. So let’s be honest. The run-up didn’t come from anticipation of the halving.
Figure 6 shows BTC performance between BTC ETF approval and halving. The approval of the BTC ETF in January 2024 increased demand for BTC, causing the 100-day gain in the 5th cycle to exceed the average cycle gain by +17%.
Figure 6: BTC price performance 200 days before each halving
Source: Outlier Ventures, Google
Figure 7 shows the performance of the BTC ETF 100 days after its approval and the BTC halving. It’s clear that ETF approval drives price action more significantly than the halving, as evidenced by the roughly 29% gap between 100-day performance.
Figure 7: BTC performance and ETF catalysts 100 days after halving
Source: Outlier Ventures
“Thus, the BTC ETF is driving demand and price action ahead of time that we would normally see around the halving!”
This is a weak argument to defend the 4-year cycle. The truth is, both catalysts are separate and independent of each other. ETFs are a demand-driven catalyst, while the halving is considered a supply-driven catalyst. They are not mutually exclusive, and if the halving remains relevant, we should see significant price action on the back of this dual catalyst.
2016 was the last year
I believe 2016 and Cycle 3 were the last times that the halving had a truly significant impact on the market. As discussed in Figure 2, the chart below illustrates the impact on the market if all miners sold on the day they received their block reward. As you can see, around mid-2017, this fell below 1% and today it is barely above 0.20%, indicating that the impact of the halving is minimal.
Figure 8: Potential market impact if all miners sold their daily BTC block rewards
Source: Outlier Ventures
To understand the declining importance of the impact of miners’ financial decisions, let’s take a closer look at the different variables at play.
variable:
Total daily BTC block rewards – decreasing every cycle (↓)
Daily BTC volume – rising as the market matures (↑)
→ Over time, block rewards will decline and the market will mature, reducing the relevance of miner influence.
Figure 9 shows BTC transaction volume and BTC block rewards accumulated by miners. The sharp rise in transaction volume is the real reason why the correlation of miner block rewards has become insignificant.
Figure 9: Daily BTC Miner Rewards and Daily Transaction Volume
Source: Outlier Ventures
For those who were there at the time, it’s clear what drove the volume growth during that period. To recap: After Ethereum launched in 2015 and unlocked smart contract functionality, the ICO boom ensued, leading to the creation of many new tokens on the Ethereum platform. This surge in new token issuance led to a decline in BTC’s dominance. The influx of exciting new assets (i) drove volume across all sectors of the digital asset market, including BTC; and (ii) incentivized exchanges to mature faster, allowing them to more easily attract users and handle larger volumes.
Figure 10: New ETH token issuance and BTC dominance in Cycle 3
Source: Outlier Ventures
So…what about 2020?
A lot of things happened in the third cycle, which logically reduced the impact of mining fund management and, in turn, the impact of the halving as a catalyst for BTC. What about 2020? That time BTC rose by about 6.6 times within a year after the halving. This was not due to the halving, but to the unprecedented amount of money issued in response to Covid-19.
While the halving is not a fundamental factor, it may have influenced BTC’s price action from a psychological perspective. As BTC makes headlines around the halving, it provides a target for people to invest their excess capital at a time when there are few other spending options. Figure 11 shows the real reason for the rally. Just a few months before the May 2020 halving, the U.S. money supply (M2) surged at a rate unprecedented in modern Western history, sparking speculation and inflation across a variety of asset classes including real estate, stocks, private equity, and digital assets.
Figure 11: US money supply (M2) and BTC price before and after the 2020 halving
Source: Outlier Ventures, Federal Reserve Bank
In addition to the inflow into BTC, it is important to realize that the money printing activity occurred after the DeFi spring, which then developed into the DeFi summer. Many investors were attracted by the attractive yield opportunities on the chain and put funds into cryptocurrencies and utility tokens to capture this value. Since all digital assets have strong correlations with each other, BTC naturally benefited from it.
Figure 12: US Money Supply (M2) and DeFi TVL
Source: Outlier Ventures, DeFiLama
Just after the halving, a combination of factors driven by global helicopter money policies triggered the largest cryptocurrency rally to date, making the change in block rewards seem to have a fundamental impact on price movements.
Remaining Miner Supply
“What about the remaining BTC supply held by miners in vaults? This supply was accumulated in previous periods when hashrate was lower and block rewards were higher.”
Figure 13 examines the miner supply ratio, which is the total amount of BTC held by miners divided by the total BTC supply, effectively showing how much supply miners control. The impact of miners’ treasury decisions on BTC prices is largely a result of the block rewards they accumulated in the early days.
As shown in the chart, the supply ratio of miners has been steadily decreasing and is currently around 9.2%. Recently, there has been an increase in OTC activity from miners selling BTC, possibly to avoid having too much impact on the market price. This trend may be due to lower block rewards, higher hardware and energy input costs, and the lack of a significant increase in BTC prices - forcing miners to sell their BTC faster to remain profitable.
We understand the impact of halving on the profitability of the mining industry, and they need to adjust their fund management to remain profitable. However, the long-term direction is clear. The impact of halving on the price of Bitcoin will only decrease over time.
Figure 13: Miner supply ratio and month-on-month change rate
Source: Outlier Ventures, CryptoQuant
in conclusion
While the halving may have some psychological impact, reminding holders to pay attention to their dusty BTC wallets, it is clear that its fundamental impact has become irrelevant.
The last time a halving had a meaningful impact was in 2016. In 2020, it was not the halving that sparked the bull run, but the response to COVID-19 and the subsequent money printing.
For founders and investors trying to time the market, it’s time to focus on more important macroeconomic drivers rather than relying on four-year cycles.
With this in mind, we will explore the true macro drivers behind market cycles in future token trendlines.
