Introduction
• Halving market: You need to know what kind of rhythm represents making money, is it the plucking of small hands, the trembling of strings, or the dancing of the bow, pulling up and down violently.
• Market status: There is only one big pie here. The financial utopia was originally Plato’s, but people turned it into Indian flying pancakes or even cyberpunk pancakes.
• ETF effect: "Moshisha" is called the "king of water quality" because of its good production of high-quality goods. This name is intimidating and has enough gimmicks. Even if you know that it is difficult to increase the price, the price of its raw materials will not be too low. The reason is simple: it is easy to sell.
• Capital entry: The focus of the story of a pair of chopsticks has never been on the struggle. It is important to recognize your own strength, and it is even more critical to understand what you are facing.
• To individual investors: Your chance of encountering aliens is about one in seven billion, and your success rate in creating alien life is 50%. You always think that it is the level of technology that limits your imagination, but in fact you don’t see clearly. Investment is a game of probability.
With the completion of Bitcoin halving, the crypto world’s once-in-four-year “storm time” has officially begun.
Many people see the "halving" as an opportunity. The K-lines that break the top intersect with the time nodes of the halving cycle, and the logic of supply and demand strengthens the correlation between the two. As the structure of the Bitcoin market changes, the time node of this halving cycle also carries the blessing of many external factors. This article will discuss them one by one in depth and find ways for investors to deal with this halving cycle.
Why halving?
First of all, we need to figure out why Bitcoin needs to be halved.
Halving is the halving of the incentives of the Bitcoin network. In the Bitcoin network, miners need to perform a large number of hash calculations to find a hash value that meets certain conditions in order to package new transactions into blocks and add them to the blockchain. The first transaction in each Bitcoin block will generate Bitcoin, and miners who successfully find the correct hash value will receive Bitcoin rewards.
Satoshi Nakamoto hopes to make Bitcoin a scarce resource similar to gold through the halving mechanism, providing a way to distribute currency units to the circulation basin without involving the issuance of currency by a centralized authority. The two are similar in mining and supply mode. Gold mining requires expensive equipment and equipment, high labor costs and transportation costs, and rewards (gold) are obtained from gold mines and injected into the market. As the amount of gold mined increases, the difficulty of mining unborn gold also increases significantly. In the Bitcoin network, miners consume resources (CPU and electricity) to process transactions, obtain BTC incentives, and finally inject them into the secondary market.
After this halving, the block reward will change from 6.25 BTC to 3.125 BTC. The impact on miners' income needs to be explored from different stages. For example, after the first halving, the number of bitcoins miners received was reduced from 50 to 25. Subsequently, the price of bitcoin rose from a few dollars to hundreds of dollars, and the miners' income rose accordingly. The sharp rise in prices compensated for the impact of the halving. The emergence of the 2024 inscription provides an additional source of income for Bitcoin miners.
In addition, the Bitcoin network has a built-in difficulty adjustment mechanism, which dynamically adjusts the mining difficulty to cope with changes in network computing power (hash rate) to maintain the miners' income level. The difficulty adjustment mechanism uses 2016 blocks (about two weeks) as an adjustment cycle, and adjusts according to the actual block time of the previous cycle. If it is less than two weeks, the difficulty will be increased (up to 4 times), and if it is more than two weeks, the difficulty will be reduced (up to 75%).
Combining the past few halvings with the development of the mining industry and the ecology of the Bitcoin network, Bitcoin has formed a closed value loop. Bitcoin halvings have led to an increase in BTC prices, escalating competition among miners, increasing mining technology and hardware requirements, increasing hash rates, increasing Bitcoin network difficulty, increasing miner costs, improving block efficiency, and increasing Bitcoin network value. Throughout the process, good coins drive out bad coins, efficient miners replace less efficient miners, and the Bitcoin network ecology has developed.
The essence of the halving mechanism is to encourage miners to maintain the long-term value of the Bitcoin network and the overall security of the network. On the one hand, the halving mechanism of Bitcoin can control inflation through supply, and realize the value storage of its tokens through increased scarcity; on the other hand, with the reduction of mining rewards, miners will rely more on transaction fees as a source of income, thereby promoting the activity and efficiency of the entire network transaction, and ensuring the security and anti-attack capabilities of the network, thereby enhancing the value of the Bitcoin network.
Thinking: What is the truth behind the “halving market”?
In the information we receive, we subconsciously ignore the hidden "necessary conditions".
Combined with the nature of Bitcoin's halving, halving drives the market, and the necessary condition that most people tend to overlook is consensus. This is an explanation that conforms to the properties of currency. Consensus determines the scope of circulation. As circulation increases, prices also increase.
The more people agree with the value of Bitcoin, the more users there are, the more people participate in circulation, the more liquidity there is, and the price trend rises. This is the normal market logic. The price of Bitcoin and consensus should be positively correlated. Looking at the past price trends of Bitcoin, there are several times that the price peaks that do not conform to the horizontal parabolic trend, and there are external factors that affect the Bitcoin market.
2013: Mt.Gox saw a large number of suspicious transactions. Two robot accounts, Markus and Wiley, executed large-scale Bitcoin buy orders, causing the price to rise sharply.
2017: From October 1 to December 16, 2017, the price of Bitcoin rose from $4,403.74 to a high of $19,497.4. During this period, USDT was issued 28 times, with a total of 705 million.
2024: On March 12, the net inflow of Bitcoin ETF exceeded US$1 billion. Subsequently, the price of Bitcoin broke through US$73,000, setting a record high.
Is Bitcoin's status shaken?
Analysts at JPMorgan Chase once said that Ethereum will surpass Bitcoin in 2024. He believes that the Cancun upgrade will enhance Ethereum's competitiveness. At the same time, favorable factors such as Bitcoin halving and ETF have already affected the price of Bitcoin, and the stamina is insufficient.
Many people believe that, apart from the safe-haven properties of Bitcoin, Ethereum's smart contracts and DApps can create more growth opportunities. In addition, the rise of blockchain networks such as BNB and SOL has brought diversified financial products and services to the crypto world, which is undoubtedly more attractive to investors seeking diversified portfolios and higher potential returns.
In the past, Bitcoin was seen more as a means of storing value; today, the Bitcoin network is no longer limited to being a medium of exchange for currency, but has been endowed with new functions such as NFT and tokenization.
From the perspective of on-chain value, after the Cancun upgrade, L2 has achieved initial results in terms of gas fees and throughput, but the gas fee optimization of Ethereum itself is not obvious enough. Moreover, Ethereum developers need to consider the pressure brought by the increase in on-chain activities, and a lot of development is still needed to achieve the final form of Rollup expansion.
In 2024, the innovation of Bitcoin network Ordinals and BRC-20 token standards marked a major breakthrough for Bitcoin. The Ordinals protocol allows recording arbitrary data on the Bitcoin blockchain, deploying, minting and transferring fungible tokens on the chain, and creating digital artworks or NFTs. For the Bitcoin ecosystem, this is undoubtedly a breakthrough from 0 to 1, making DeFi possible on the Bitcoin network.
Judging from the price performance, the Cancun upgrade and Ethereum ETF were originally going to be the new narrative for its breakthrough. Who would have thought that Cheng Yaojin would appear halfway through, and the periodic craze of Meme made market funds rush to the SOL ecosystem. The delay in the Ethereum ETF resolution also aggravated the market's bearish sentiment. As of April 19, the price of Ethereum has retreated more than 24% from its highest point before the upgrade.
In contrast, Bitcoin's price reached a record high of $73,798 in mid-March, accounting for nearly 55% of the cryptocurrency market's market capitalization, the highest level since April 2021.
In addition, Bitcoin is the product of Satoshi Nakamoto's reflection on the 2008 financial crisis. He hopes to build an orderly, fair, and public interest-oriented decentralized financial system to cope with the limitations and crises of the traditional financial system. And now, the situation of "the chancellor is on the verge of a second round of bailouts for the banking industry" is playing out. The Japanese yen, Indian rupiah, Korean won and other monetary systems are facing severe tests under the pressure of a strong US dollar index and short selling by international capital, and the yen exchange rate has fallen to a 34-year low. The United States itself will also face the choice of cutting off its own arm. The credit of the US dollar system will collapse, and the hard currency attributes of the currency will weaken. The US dollar is no longer "US dollars."
Investors need to focus on the negative impact when there is a widespread liquidity tightening in the market.
• Pressure to liquidate assets: Tight liquidity means increased credit difficulty and increased risk of default, requiring the liquidation of assets to increase liquidity reserves, which may lead to a sell-off of Bitcoin.
• Market panic pressure: Liquidity tightening will be accompanied by increased economic uncertainty and market panic, and investors will tend to adopt relatively conservative investment strategies.
• Hidden dangers of market depth: Liquidity itself is extremely important to market operations. When liquidity is tight, the market’s ability to absorb large transactions decreases, that is, the market depth decreases, and small transactions may occur, causing large price fluctuations.
PayPal co-founder Peter Thiel once said publicly: "Central banks are bankrupt and we are at the end of the legal currency system. Bitcoin is the ultimate alternative to the entire traditional financial system." Currently, Bitcoin's market capitalization ranks 10th among global assets. Its huge consensus base and its importance in the financial market are self-evident.
Are ETFs holding back the halving?
In recent years, the connection between the crypto world and traditional financial markets has become increasingly close. For example, the Bitcoin ETF has been approved, and financial institutions such as Grayscale and BlackRock have provided innovative investment products to investors in traditional financial markets by holding Bitcoin.
JMP Securities, a well-known Wall Street investment institution, has released a research report stating that it is expected that in the next three years, spot ETFs tracking Bitcoin (BTC) may have an inflow of up to $220 billion. They believe that the flow of funds will continue to grow significantly, and regulatory approval is only the beginning of a "longer capital allocation process."
So far in 2024, Bitcoin ETFs have accumulated assets of approximately US$56 billion.
But the situation has changed recently. The Bitcoin ETF has experienced net outflows for five consecutive days, with total outflows exceeding US$319 million.
Inflation has not been brought under control, and government bonds have become risky assets, greatly affecting investors' confidence in the market. Bitcoin prices have also fluctuated greatly, falling by more than $10,000 from their recent historical highs. It is hard not to sigh that the ups and downs are all due to ETFs.
The emergence of Bitcoin ETFs has changed the market dynamics. Bitcoin ETFs allow investors to invest in Bitcoin indirectly through traditional investment channels, and investors need to pay more attention when considering the impact of halving.
1. Bitcoin ETF increases liquidity, attracts a large number of institutional investors and funds, and will have an impact on Bitcoin prices before and after halving.
2. Bitcoin ETFs increase the demand for Bitcoin and reduce the circulating supply, which can easily affect investors' accurate judgment of market expectations for the halving cycle. Investors need to distinguish between halving expectations and the actual situation after halving. Affected by Bitcoin ETFs, the market may have reflected expectations before halving, resulting in price adjustments after halving.
3. The behavior of long-term holders during the halving period has a significant impact on the market supply and demand balance. If long-term holders choose to sell Bitcoin after the halving, it will increase supply on the market, putting pressure on the price. The fund flow of ETFs may affect the decisions of long-term holders, thereby further affecting the market's supply and demand balance.
With whales at the helm, will halving turn into a reshuffle?
According to a report by Glassnode, there are currently about 2.317 million bitcoins in circulation, accounting for only 11.7% of the total circulation. The entry of traditional financial institutions has undoubtedly accelerated the pace of the bitcoin market's transition to institutional dominance.
The entry of institutions into the Bitcoin market will bring more stringent investment processes and risk management measures, which will improve the liquidity and depth of the market and catalyze the development of the crypto market towards maturity. Moreover, with the participation of institutional investors, more perfect requirements will inevitably be put forward for the regulatory framework to protect the interests of investors, reduce market speculation, and further promote the healthy development of the market.
In addition, due diligence and compliance operations of institutional investors help improve market transparency and efficiency. As more regulated financial activities enter the cryptocurrency market, the irrational prosperity and bubble risks of the Bitcoin market will be reduced. How regulators, market participants and financial institutions cooperate becomes the key.
For ordinary investors, the institutionalization of the Bitcoin market is like a filter. On the one hand, the entry of traditional financial institutions will bring a more stable market environment and more investment products. On the other hand, the entry of more traditional institutions means intensified competition and higher investment thresholds.
Especially in the face of the halving cycle, there is a possibility of short-term fluctuations in the price of Bitcoin, and institutions may use fluctuations to execute short-term transactions or make profits through strategies such as selling high and buying low. Ordinary investors need to evaluate their investment strategies more carefully and seek professional financial advice, otherwise they will only be eliminated.
To individual investors
In the investment market, everyone has a 50% chance of turning things around.
Insights into historical data, macroeconomics, market dynamics and other factors will help you increase your chances of winning.
But what is more important to remember is that the impact of the wrong investment perspective and mentality on the probability of winning is reduced exponentially.
If you want to gain wealth, you first need to understand wealth, and then learn to forget wealth. #比特币减半 #挖矿同期
