Bitcoin halving, a significant event in the cryptocurrency market, is expected to occur in April 2024. Traders are hopeful that this event will trigger a major bull run. However, it is essential to note that previous halvings did not solely cause bullish trends. Macro factors, such as abundant fiat liquidity, played a significant role in past halvings. In this article, we will discuss the Bitcoin halving, its impact on the market, and the importance of macro factors in determining the cryptocurrency’s price.
Understanding the Bitcoin Halving
The Bitcoin halving refers to the code that reduces the cryptocurrency’s pace of supply expansion by 50% every four years. The next halving will reduce the per-block reward paid to miners to 3.125 BTC from 6.25 BTC. This event is crucial as it helps maintain Bitcoin’s scarcity and value over time.
Bitcoin’s previous halvings took place in November 2012, July 2016, and May 2020. In each instance, the price of Bitcoin rallied to new record highs in the following 12-18 months before entering bear markets. These bear markets typically lasted around 15-16 months before the next halving. Bitcoin’s year-to-date gain of 56% in 2023 is consistent with the timing of previous price bottoms.
Factors Affecting the Bitcoin Halving and Market Trends
The expected halving-led uptrend is contingent on major central banks increasing their year-on-year M2 money supply growth rates. The aggregate M2 of the four major central banks, the Fed, ECB, BOJ, and PBOC, represents the total value of their respective fiat currency circulating in the market. The higher the M2 growth rate, the higher the Bitcoin price could go.
Previous post-halving bull runs were characterized by a 6% or higher aggregate M2 money supply growth of the major central banks. Bear markets coincided with a deceleration in the money supply growth rate. This pattern validates Bitcoin’s popularity as a pure play on fiat liquidity.
The total M2 money supply growth rate has turned positive this year but remains well below the 6% mark. Most central banks have raised rates rapidly over the past 12-18 months to control inflation, and the likelihood of renewed liquidity easing in the coming months appears low.
Bitcoin Halving and Its Impact on the Market
While the Bitcoin halving is an essential factor in determining the cryptocurrency’s price, it is not the only one. As mentioned earlier, macro factors, such as the M2 money supply growth rate, play a significant role in driving the market trends.
It is crucial to consider these macro factors when analyzing the potential impact of the upcoming Bitcoin halving on the market. A higher M2 growth rate could lead to a more significant price increase, while a lower rate may result in a less pronounced effect.
Conclusion
In conclusion, the Bitcoin halving set to occur in April 2024 could trigger a major bull run in the cryptocurrency market. However, it is essential to remember that previous halvings did not solely cause bullish trends. Macro factors, such as abundant fiat liquidity, played a significant role in past halvings.
The expected halving-led uptrend is contingent on major central banks increasing their year-on-year M2 money supply growth rates. As such, it is crucial to consider these macro factors when analyzing the potential impact of the upcoming Bitcoin halving on the market. By understanding the interplay between the Bitcoin halving and macro factors, traders and investors can make more informed decisions about the cryptocurrency market’s future.
