With the continuous changes of the "atypical bear market", the "halving" narrative that has never faded in the crypto world has arrived. On April 20, 2024, the block reward will drop from 6.25 BTC to 3.125 BTC.
All that is past is prologue. As one of the most important narratives in the crypto industry, Bitcoin halving has always been a good medicine to boost market confidence. Now that the bull market seems to be within reach, will this round of halving cycle follow the same rhyme as the previous ones?
01
The historical cycle of halving
For the crypto industry, each halving is a major event, especially the first two halving cycles of Bitcoin, which saw an astonishing increase of dozens of times (in the short term, after the two halvings, there were short-term declines due to the exhaustion of positive factors, but then after the adjustment was completed, a long-term upward trend emerged).
However, starting from the third halving in 2020, as the number of industry practitioners, market attention and the improvement of supporting infrastructure have all improved significantly than before, Bitcoin is no longer a niche product limited to geek circles. linkage with more external factors.
To summarize briefly:
Before the first two halvings (2012, 50 BTC to 25 BTC; 2016, 25 BTC to 12.5 BTC), geeks in the circle were more concerned about the possibility of Bitcoin as electronic cash;
During the third halving (2020, 12.5 BTC to 6.25 BTC), the focus of Bitcoin shifted to its attribute as a payment tool, which also triggered a series of debates (the subsequent BCH fork was almost the top trend in the circle);
In the fourth halving cycle (2024, 6.25 BTC to 3.125 BTC), with the approval of the Bitcoin spot ETF application, Bitcoin has become an alternative asset, and attention to traditional institutions and capital layout has become the main theme;
Therefore, compared with the previous two halvings, the popularity of Bitcoin's third halving is unprecedented. At the same time, the overall political and economic environment of the world during Bitcoin's third halving also affected its performance:
Under the influence of macro factors, from March 12 to March 13, two months before the halving on May 11, 2020, Bitcoin began to fall from $7,600, first falling to $5,500 and fluctuating. Later, it broke through the support point all the way, reaching a minimum of $3,600. The overall market value evaporated by $55 billion in an instant, and the entire network was liquidated for more than 20 billion yuan, accurately realizing the "price halving".
However, after the halving in May, DeFi Summer ushered in a new bull market cycle, and Bitcoin also surged to $60,000, nearly 20 times the lowest point before the halving.
In general, according to the laws of historical halving cycles, from a traditional perspective, when Bitcoin is halved, the price will return to half of the price of the previous bull market. Just last month, the price of Bitcoin returned to the price of the previous bull market of 60,000+, and even exceeded 71,000 US dollars at its highest.
So, will the halving start a new bull market cycle? Can it achieve a 10-fold increase from the current volume?
02
New variables in Bitcoin ecology
However, at the same time, in the context that Bitcoin has undergone three halvings, the block reward has been reduced to 6.25, and the number of mined blocks has reached more than 19 million, in fact, many situations and many things have reached the point of time to change a new perspective and reconsider.
Especially in addition to this round of Bitcoin halving, the entire industry and Bitcoin itself have seen some new variables worthy of attention compared to previous halvings.
(1) Commission income
According to Bitcoin's halving rules, the block reward starts at 50 bitcoins, and the rule is to halve every four years. It has been halved three times to 6.25 bitcoins. The next halving will be in 2024. It will continue to halve like this, and by 2140, there will be no more block rewards for Bitcoin.
However, the transaction fee will always exist, so after each round of halving, the block reward will gradually decrease or even approach zero. In the future, the income of block producers will become very simple, with only transaction fee rewards.
The prosperity of the Bitcoin ecosystem, especially BRC20, since 2023 has set off a new wave of "BitcoinFi". The activity of transactions within the Bitcoin ecosystem has reached a new peak, thereby boosting a surge in Bitcoin's transaction fee income.
Among them, the BTC mining fee income on December 17, 2023 reached a new high in the past five years, reaching 696.95 BTC (about 19.08 million US dollars), accounting for more than 40% of the miners' total income on that day.
(2) Approval of Bitcoin Spot ETF and Development of Bitcoin Ecosystem
A. Inscription fever
At the end of 2023, the "inscription fever" was set off. On the basis of the existing Bitcoin Segregated Witness and other expansions, the Ordinals protocol and BRC20 protocol, which were first implemented, successfully played a combination punch, opening the door to the Bitcoin ecosystem, and the Bitcoin ecosystem has since risen. For details, please see: "Insert" Bitcoin inscriptions, what is "insert"? Will it be considered a vulnerability by core developers?
Because of the popularity of the inscription, everyone began to shift their attention from Ethereum to Bitcoin, especially institutions, which began to invest money in laying out the Bitcoin ecological infrastructure, which seems to be the beginning of Bitcoin Summer.
B. Bitcoin Layer 2
Recently, Bitcoin Layer2s such as BEVM and BOB have completed financing ranging from millions to tens of millions. Coupled with the recent launch of Nervos' RGB++ and the creation of Seal, the popularity of Bitcoin Layer2 CKB (CKB, translated as public knowledge base, is the first layer of the Nervos Network, responsible for storing all transaction data and smart contracts) has soared.
There are many Bitcoin Layer2s on the market. We simply divide them into four categories, namely Bitcoin sidechain, UTXO+client verification, Rollp and Taproot Consensus. For details, please see: Bitcoin's popular second-layer inventory (Part 1), Bitcoin's popular second-layer inventory (Part 2)
C. Rune Fever
In the days leading up to the upcoming Bitcoin halving, activities regarding ordinals and runes in the Bitcoin ecosystem are booming.
Introduced by @rodarmor in January 2023, Ordinals increased the amount of data that can be stored on the blockchain, popularizing inscriptions. This inspired a series of innovations using the system, such as BRC-20 and Runes, the differences between which are shown in the table below.
With the Bitcoin halving and the launch of the Rune Protocol, Ordinal’s trading volume has grown exponentially. It is worth noting that in the past month, Bitcoin’s trading volume has almost reached the same level as Ethereum, with the main markets being OKX and MagicEden.
The most well-known NFT collectibles on Ordinal are NodeMonkes, BitcoinPuppets, and QuantumCatsXYZ. In addition to having strong community support, holders of these collectibles have received various Airdrops, some of which have distributed quite high values, creating a wealth effect for the Ordinal/Rune ecosystem. Similar to WIF, this generates a loyal community that helps drive the story even more strongly. As a result, market excitement about the Rune Protocol is also high at the moment.
D. Bitcoin Spot ETF
At 4:00 a.m. on January 11, 2024, Beijing time, the U.S. Securities and Exchange Commission (SEC) approved 11 spot Bitcoin ETFs at the same time. The importance of Bitcoin spot ETFs is mainly reflected in two aspects:
First, it increases accessibility and popularity. As a regulated financial product, Bitcoin ETF provides a wider group of investors with the opportunity to acquire Bitcoin.
The second is to gain regulatory recognition and enhance market acceptance, which will help them conduct business in the cryptocurrency industry.
For details, please see: A historic moment! Bitcoin spot ETF approved, a new chapter for the crypto industry
What impact will the passage of Bitcoin spot ETF have on the Bitcoin ecosystem?
The approval of the spot ETF will undoubtedly give a "peace of mind" to the crypto industry, including the Bitcoin ecosystem. Bitcoin assets may become more and more stable and less volatile in the future.
Simply put, in the past, when there were large fluctuations and bear markets, the development of ecological projects often encountered obstacles. Entrepreneurs and users lacked confidence and tightened their belts, resulting in a significant reduction in financing amounts and talent loss.
As a native asset of the Bitcoin ecosystem, the steadily rising price of Bitcoin is beneficial to the development of the ecosystem and avoids the impact on ecological development under extreme market conditions.
In general, the approval of the spot ETF can give the Bitcoin ecosystem more confidence to develop and gain more recognition. For details, please see: Bitcoin ETF approval leads to a decline? The future market trend is not as simple as we think
03
Where will Bitcoin go after the fourth halving?
As early as the Lunar New Year, when the price of Bitcoin exceeded $40,000, various institutions and everyone had already made predictions on the price of Bitcoin, with most predictions being $90,000: What do you think of Bitcoin in 2024?
Then by the end of February, Bitcoin broke through 53,000, 54,000, 55,000, and even exceeded 64,000 US dollars, setting a new high since December 2021. The market atmosphere seems to have gradually returned to the bull market. 2024 is aiming for a new high? What "bull market engines" have emerged in Bitcoin?
In summarizing the major events that have affected the price of Bitcoin in the crypto market, such as the continued explosion of the Bitcoin ecosystem and the approval of spot ETFs, is this halving a positive or negative development? Will it bring a bigger bull market in the future? Vernacular Blockchain has already made a prediction: 450,000 per coin! BTC/CNY hits a record high. Will Bitcoin plummet or see a big bull market after the halving?
And ECOINOMETRICS predicted last week that if Bitcoin were to follow a similar post-halving growth trajectory as in previous cycles, we would see a price of between $140,000 and $4.5 million per coin.
04
Summary
There are less than 24 hours until the Bitcoin halving node. This may be the first (or second) Bitcoin halving "event" that most practitioners and investors in this round will personally witness and experience. What do you think about the upcoming halving, Bitcoin, and this cycle? Comments and exchanges are welcome.