With the constant 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 be reduced from 6.25 BTC to 3.125 BTC. Everything in the past is a 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 before?
01
The historical cycle of halving is a grand event for the crypto industry. In particular, the first two halving cycles of Bitcoin have seen an astonishing increase of dozens of times (in the short term, after the two halvings, both There was a short-term decline as the profits were exhausted, but then the adjustment was completed and a long-term rise 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. Briefly summarized: before the first two halvings (2012, 50BTC to 25BTC; 2016, 25BTC to 12.5BTC), geeks in the circle were more concerned about the possibility of Bitcoin as electronic cash; the third halving (2020, 12.5BTC to 6.25BTC) During the cycle, the focus on Bitcoin shifted to its attributes as a payment tool, which also triggered a series of debates (the subsequent BCH fork was almost the top trend in the circle); and In the fourth halving cycle (2024, 6.25 BTC to 3.125 BTC), with the approval of the application for Bitcoin spot ETF, Bitcoin has become an alternative asset, and focusing on traditional institutions and capital layout has begun to become the main theme; so compared After the first two halvings, the popularity of Bitcoin’s third halving was also 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 decline from $7,600, and first fell to $5,500. 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 opened a new round of bull market cycle, and Bitcoin also rushed to $60,000, nearly 20 times the lowest point before the halving. In general, according to the law of the historical halving cycle, 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.
So, will the halving start a new bull market cycle? Can it achieve a 10-fold increase on the current volume?
02
New variables in the Bitcoin ecosystem However, at the same time, with Bitcoin having experienced three halvings, the block reward has dropped to 6.25, and the number of mined coins has reached more than 19 million, it is time to rethink many situations and many things from a new perspective. In particular, in addition to this round of Bitcoin halving, the entire industry and Bitcoin itself have seen some new variables worthy of attention compared to the previous halvings. (1) Transaction fee income According to Bitcoin's halving rules, the block reward starts at 50 Bitcoins, and the rule is to halve once every four years. It has been halved three times to 6.25, and the next halving will be in 2024. If it continues to halve, Bitcoin will no longer have block rewards by 2140; while transaction fees will always exist. Therefore, with each round of halving, the block reward will gradually decrease or even approach zero, and the income of block producers in the future 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) The approval of the Bitcoin spot ETF and the development of the 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 the BRC20 protocol that were first implemented successfully launched a combination of punches, opening the door to the Bitcoin ecosystem. The Bitcoin ecosystem has since risen. For details, please see: "Attack" Bitcoin inscriptions, what exactly is "attacked"? Will it be reduced to zero if it is regarded as a vulnerability by core developers? Because of the popularity of inscriptions, everyone has begun to shift their attention from Ethereum to Bitcoin, especially institutions, and began to spend money to lay out the Bitcoin ecological infrastructure, which is quite like the arrival of Bitcoin Summer. B. Bitcoin Layer 2
Recently, Bitcoin Layer2s such as BEVM and BOB have raised millions of dollars, and tens of millions of dollars. 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 Hot Second Layer Inventory (Part 1), Bitcoin Hot Second Layer Inventory (Part 2)
C. Rune fever Just in the days before the Bitcoin halving, the Bitcoin ecosystem is hot with activities related to ordinals and runes. Ordinals were launched by @rodarmor in January 2023, which increased the amount of data that can be stored on the blockchain, thereby popularizing inscriptions. This has inspired a series of innovations using the system, such as BRC-20 and runes.
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 improves accessibility and popularity. As a regulated financial product, Bitcoin ETF provides a wider group of investors with the opportunity to acquire Bitcoin. Second, it gains regulatory approval and enhances market acceptance, which helps them conduct business in the cryptocurrency industry. For details, please see: Recorded in history! Bitcoin spot ETF passed, opening a new chapter for the crypto industry. What impact does the passage of Bitcoin spot ETF have on the Bitcoin ecosystem? The passage of spot ETFs will undoubtedly give the crypto industry, including the Bitcoin ecosystem, a "reassurance". 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
After the fourth halving, where will Bitcoin go? As early as the Lunar New Year, when the price of Bitcoin exceeded $40,000, various institutions and everyone had already made predictions about the price of Bitcoin, and most of the predictions were $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 summary of 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? 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? ECOINOMETRICS predicted last week that if Bitcoin follows a similar growth trajectory after the halving as in previous cycles, we will see a price of Bitcoin between $140,000 and $4.5 million per coin.
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.
