As the "atypical bear market" continues to change, 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 the bull market seems within reach. Will this halving cycle have the same rhyme as the previous one?
The historical cycle of halving
For the crypto industry, each round of halving is a grand event, especially the first two halving cycles of Bitcoin, which both saw astonishing increases of dozens of times (in the short term, after the two halvings, all profits were exhausted. There was a short-term decline, but then the adjustment was completed and a long-term rise emerged).
However, starting from the third halving in 2020, due to the significant improvement in the number of industry practitioners, market attention, and improvement of supporting infrastructure, Bitcoin is no longer a niche product limited to geek circles. Linkage with more external factors.
To summarize simply:
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 serving as electronic cash;
During the third halving (2020, 12.5 BTC to 6.25 BTC) 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 universal within the circle) Top stream);
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;
Therefore, compared with the previous two halvings, the popularity of Bitcoin’s third halving is 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 fall from $7,600, first falling to $5,500 and fluctuating. Subsequently, it broke through the support point all the way, reaching as low as 3,600 US dollars. The overall market value evaporated by 55 billion US dollars in an instant, and the entire network liquidated more than 20 billion yuan, accurately achieving "price halving".
However, after the halving in May, DeFi Summer started a new bull market cycle, and Bitcoin also hit $60,000, nearly 20 times higher than the lowest point before the halving.
Generally speaking, according to the laws of the historical halving cycle, from a traditional perspective, the price of Bitcoin will return to half of the previous bull market price during the halving. Just last month, the price of Bitcoin returned to half of the previous bull market price. In the last bull market, the price was over 60,000, with the highest even exceeding $71,000.
So, will a new bull market cycle begin after the halving? Can it achieve an increase of more than 10 times on today's scale?
New variables in Bitcoin ecology
However, at the same time, under the background that Bitcoin has experienced three halvings, the block reward has been reduced to 6.25, and the number of mined coins has reached more than 19 million, in fact, many situations and many things have to be reconsidered from a new perspective. It's time.
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) Fee income
According to Bitcoin’s halving rules, the block reward starts at 50 Bitcoins, and the rule is to be halved every four years. It has been halved three times to 6.25. The next halving will be in 2024, and it will continue to be reduced. , Bitcoin will no longer have block rewards by 2140;
The handling fees will always exist, so with each round of halving, the block rewards will gradually decrease or even approach nothing. In the future, the income of block producers will become very single, only handling fee rewards.
The prosperity of the Bitcoin ecosystem, especially BRC20, since 2023 has set off a new wave of "BitcoinFi", and the activity of transactions within the Bitcoin ecosystem has reached a new peak, thus boosting Bitcoin's fee income to surge.
Among them, the BTC mining fee income on December 17, 2023 hit a new high in the past five years, reaching 696.95 BTC (approximately US$19.08 million), accounting for more than 40% of the total income of miners that day.
(2) The adoption of Bitcoin spot ETF and the development of Bitcoin ecosystem
A. Inscription fever
The "Inscription Craze" started at the end of 2023. On the basis of the existing expansions such as Bitcoin Segregated Witness, the Ordinals protocol and the BRC20 protocol, which were the first to be implemented, successfully combined the punch and opened the door to the Bitcoin ecosystem. The Bitcoin ecosystem has been on the rise since then. . For details, please see: "beat" Bitcoin inscription, what exactly does "beat" mean? If it is regarded as a vulnerability by core developers, will it be reset to zero?
Because of the popularity of Inscription, everyone has begun to shift their attention from Ethereum to Bitcoin, especially institutions, which have begun to spend money to lay out Bitcoin ecological infrastructure, which is quite similar to the decline of Bitcoin Summer .
B. Bitcoin second layer
Recently, Bitcoin Layer 2 such as BEVM and BOB have completed financing ranging from millions to tens of millions. Coupled with the recent launch of Nervos’s RGB++ and the casting of Seal, CKB (CKB, translated as public knowledge) for Bitcoin Layer 2 The library, which is the layer 1 network of the Nervos Network and is responsible for storing all transaction data and smart contracts, has soared in popularity.
There are many Bitcoin Layer 2 currently on the market. We simply divide them into four categories, namely Bitcoin side chain, UTXO + client verification, Roullp and Taproot Consensus.
C. Rune fever
In the past few days as the Bitcoin halving is approaching, the Bitcoin ecosystem has been abuzz with activities on ordinal numbers and runes.
Introduced by @rodarmor in January 2023, Ordinal popularized inscriptions by increasing the amount of data that can be stored on the blockchain. This inspired a series of innovations using this system, such as the BRC-20 and Rune, the differences between them are listed below.
With the Bitcoin halving and the launch of Rune Protocol, ordinal transaction volume has grown exponentially. It is worth noting that Bitcoin’s trading volume has been almost equal to that of Ethereum over the past month, with the main markets being OKX and MagicEden.
The most well-known NFT collectibles in terms of numbers include NodeMonkes, BitcoinPuppets and QuantumCatsXYZ. In addition to having strong community support, holders of these collectibles also received various Airdrops, some of which were distributed at quite high values, creating a wealth effect for the Ordinal/Rune ecosystem. Similar to WIF, this creates a loyal community that helps drive the story even more strongly. As a result, excitement about Rune Protocol is also high at the moment.
D. Bitcoin Spot ETF
At 4 a.m. on January 11, 2024, Beijing time, the U.S. Securities and Exchange Commission (SEC) simultaneously approved 11 spot Bitcoin ETFs. The importance of Bitcoin spot ETF is mainly reflected in two aspects:
The first is to improve accessibility and popularity. As a regulated financial product, Bitcoin ETF provides an opportunity for a wider investor group to obtain Bitcoin.
The second is to gain regulatory recognition and enhance market acceptance, which will help them conduct business in the cryptocurrency industry.
What impact will the adoption of Bitcoin spot ETF have on the Bitcoin ecosystem?
The approval of spot ETFs will undoubtedly give the crypto industry, including the Bitcoin ecosystem, a "reassurance" that Bitcoin assets may become more stable and less volatile in the future.
To put it simply, in the past, when there was great volatility, the development of ecological projects in bear market crashes often encountered obstacles. Entrepreneurs and users lacked confidence and tightened their belts. There were problems such as greatly reduced financing amounts and brain drain.
As a native asset of the Bitcoin ecosystem, the steadily rising price of Bitcoin is beneficial to ecological development and avoids the impact on ecological development under extreme market conditions.
In general, the approval of spot ETFs can give the Bitcoin ecosystem more confidence to develop and gain more recognition. For details, please see: Did the Bitcoin ETF pass but fall? The market outlook is not as simple as we think
Where will Bitcoin go after the fourth halving?
As early as the Lunar New Year, when the price of Bitcoin exceeded US$40,000, various institutions and everyone had already made predictions on the price of Bitcoin, with most predictions being US$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, setting a new high since December 2021. The market atmosphere seems to have gradually returned to the bull market. Is 2024 aiming for a new high? What other “bull market engines” have emerged in Bitcoin?
In summarizing the major events that have occurred in the crypto market that affect the price of Bitcoin, such as the continued explosion of the Bitcoin ecosystem, the approval of spot ETFs, etc., is this halving a good thing or a bad thing? Will it bring about a bigger bull market next? Vernacular blockchain has already made predictions: 450,000! BTC/CNY hits new all-time high, will Bitcoin plummet or be in a bull market after the halving?
ECOINOMETRICS predicted last week that if Bitcoin were to follow a similar post-halving growth trajectory as in previous cycles, we would see Bitcoin prices between $140,000 and $4.5 million per coin.
summary
The Bitcoin halving node is less than 24 hours away. This may also be the first (or second) time for most practitioners and investors in this circle to witness and experience the Bitcoin halving "event". What do you think about the upcoming halving and how Bitcoin and this cycle will go? Welcome to comment and exchange.
