One year after the halving, how is Bitcoin doing?

The most recent Bitcoin halving took place a year ago today, on May 11, 2020 (UTC). To mark this event, let’s take a look back at what has happened in the Bitcoin market over the past year and look ahead to what may be in store in the future.

The importance of halving quantitative tightening

During the global liquidity crisis in early March 2020, all asset classes saw record plunges, which were followed by unprecedented monetary and fiscal stimulus. At the time, Bitcoin was priced at around $8,000 when it halved on May 11, 2020. Investors around the world began to realize that they needed to seek shelter and insulate themselves from the impact of dramatic monetary expansion. In sharp contrast, Bitcoin has undergone a quantitative tightening - where the supply issuance of new Bitcoins was cut by 50% regardless of the choices of any policymakers.

What has happened since the 2020 halving?

Since the 2020 halving event, investor sentiment around the upcoming record monetary expansion has proven to be correct. The Fed (and other major global central banks) continue to inject liquidity into the financial system to keep lending conditions easy, which has also played a major role in the adoption of Bitcoin as an alternative monetary asset that exists outside of the system.

At the time of writing, Bitcoin has risen 533% since the halving, as the supply-demand dynamics of surging demand coupled with an inelastic (and 50% reduced) supply issuance has caused the asset to surge to over $1 trillion in market cap.

Prior to the halving event, legendary Wall Street manager Paul Tudor Jones published a report titled “The Great Monetary Inflation,” in which he outlined his beliefs about the current monetary system and its future path, as well as why he believes Bitcoin is the “fastest horse.”

Shortly thereafter, in a watershed moment in Bitcoin’s rise, MicroStrategy, under the leadership of now-famous Bitcoin proponent Michael Saylor, announced it would use Bitcoin as its treasury reserve asset.

In what became an increasingly accepted view, Saylor and company decided not to use the CPI as an accurate measure of inflation, but instead decided to use the M2 monetary base to measure the inflation rate.

“Once the actual yield on our vaults got above negative 10%, we realized that nothing we were doing on the P&L mattered,” Saylor said. “We really felt like we were on a $500 million melting ice cube.”

Will this be the case with future halvings?

Prior to last year’s halving, there was a debate in the Bitcoin community and elsewhere in the broader financial system about whether the halving would be reflected in the price as the event would become known in the future. While I will not go into my personal views on this debate, it is extremely interesting that Bitcoin’s price appears to be following the S2F model first proposed by the anonymous Twitter account Plan B in March 2019 due to the nuances of Bitcoin’s price and all the exogenous variables and factors that influence it.

Will the same be true for future halvings? Who knows? But what we do know is that since the 2024 halving is only 156,872 blocks away, it might be a good idea to prepare for the next halving…

Remember, if you are not long Bitcoin, you are short. Finally, happy halving anniversary!