Bitcoin falls to $8,000 again. Do you really understand the halving bull market?

The most frequently heard keywords recently are Bitcoin halving and how low Bitcoin will fall, because the halving time is getting closer and closer, and many people are puzzled by Bitcoin’s recent market conditions. They are still studying and wondering when the halving bull market will come and whether it will come.

Last night, Bitcoin fell below $8,000 again, the last time being in early October. From a longer-term perspective, Bitcoin has basically been fluctuating and falling for about two months, with poor performance. Moreover, some of the so-called positive factors this year have almost been consumed, and many of the "bull market catalysts" that were originally expected to have great hopes have not achieved the effects we generally expected. The overall bearish sentiment in the market is still relatively strong recently, and I often hear from my friends who trade in cryptocurrencies that "it's always fun to keep shorting."

By observing my friends, I found that there are two common mentalities: one is to hope that Bitcoin will continue to rise and remain unchanged for eternity, and look forward to the arrival of a bull market. This type of people are usually investors who already hold Bitcoin (usually those who play spot trading); the other type of people hope that Bitcoin will fall from time to time as expected. This type of people are usually investors with a short-selling tendency, or small retail investors who have been waiting to get on board at a low point.

So, will the Bitcoin bull market that many people have been looking forward to come? When will it come? Let’s study and explore it from several dimensions.

Correctly understand the relationship between halving and bull market

Last year, most people speculated based on previous market cycle analysis that 2019 would be a year of sideways fluctuations, and 2020 would be the year of the Bitcoin bull market. This year, Bitcoin has returned to a high of more than $10,000. Currently, some people believe that it is already the early stage of the bull market, while others believe that it is still a bear market and are looking forward to the bull market brought about by the halving next year.

We know that the value of Bitcoin mainly comes from consensus. As a representative of decentralized technology, it brings new hope of breaking the centralization to the world. As a new type of investment product, it is also favored by investors and has formed a large demand in the market.

The essence of a bull market is that Bitcoin itself has a rigid demand in the market and is useful. In addition, some news stimulation will bring in new funds, causing the price of the currency to soar in the short term, forming a small bull market. The positive effects of halving are also based on the same logic. The output of Bitcoin is halved, and people's demand for Bitcoin increases. The supply and demand curve will change, pushing up the price of Bitcoin, so people say that halving will bring about a bull market.

However, the question to consider is whether the positive impact of halving on prices occurs before or after. I personally think that most of the positive impact occurs before. Because in the early stage, it is mostly people’s investment behavior under the influence of psychological expectations that affects the market, and many digital currencies will have this kind of speculation expectation market.

Just like the big brother of the altcoin Litecoin, it has completed its second halving on August 5 this year. Facts have proved that the highest price of Litecoin appeared about 40 days before the halving time, reaching 147 US dollars; the highest price point of the first halving event was also about 46 days before the halving time (August 25, 2015). The lowest price point in the halving process appeared about 220-240 days before the halving time. When Litecoin halved for the second time, many people bought the bottom and entered the market at about the same time according to the first halving rule, and then successfully escaped at the high point to get several times the profit. What does this example illustrate? Although this is a historical fact, not a dead law, there are always rules to follow in history, or it has reference significance. If you study Bitcoin more, you can also discover certain empirical rules.

Whether the Bitcoin bull market will come next year is not determined by the halving, but by the market bull-bear cycle and the halving process. The bull market may also be accelerated or postponed by demand, and after the bull market, there must be a bear market. When the market expands to a critical point, when the price increase exceeds the speed of new funds entering the market, the bubble may burst, and a large number of retail investors will leave the market after their funds are consumed, and the demand will enter a period of cold demand. The whole process is a process of de-bubbling.

Well-known Bitcoin price model analyst @PlanB listed a very detailed chart on Twitter. According to his analysis, he believes that there are still 7 months before the halving, and the Bitcoin halving has not come yet. The chart shows that after the two halvings in 2012 and 2016, there was a relatively obvious bull market, but the bull market after the halving in 2016 was much slower than the first one, which was probably affected by the competition from Ethereum and The DAO incident at that time.

Screenshot of PlanB’s related tweets

Therefore, we believe that a bull market may not appear immediately after the halving, and there may be the influence of other currencies and major events. However, according to the previous two halvings, the real price peak will appear more than a year after the halving. In addition, there is usually speculation before the halving. Some people have already caught it, and some have not yet boarded the train. At this time point, you can do more research on your own and grasp it according to the rules. If you really find it difficult to find the rules, I can only say that to a certain extent, you can refer to the experience of Litecoin's two halvings.

There are only 3 million bitcoins left to be mined. How many bitcoins did you hold before the bull market?

According to Blockchain.com, as of Monday, the total supply of Bitcoin has reached 17.92 million. Bitcoin analyst @Rhythm expressed his opinion on Twitter on Tuesday that the 18 millionth Bitcoin will be mined by miners this week (which means that there are only 3 million Bitcoins left to be produced), and the remaining 14.3% (about 3 million) Bitcoins will take about 120 years to be mined.

However, it is undeniable that the ranks of Bitcoin miners are growing, mining enthusiasm is high, and Bitcoin's hash rate has hit new highs this year.

Screenshot of Rhythm’s tweet

Here is an explanation, why does it take so long, 120 years? (The data may not be accurate, but it does take several times longer to mine the remaining bitcoins.) We know that Bitcoin generates a new block approximately every ten minutes, and miners will receive Bitcoin rewards at the same time. However, as time goes by, the difficulty of Bitcoin mining has been increasing, and considering the factors of network congestion; plus the Bitcoin block reward is halved every four years, it will take more time to mine the remaining Bitcoins.

What does this news mean? There are only 3 million bitcoins left, but it will take more than 100 years to produce them. So how many bitcoins do you still have the chance to own?

Last year, I read a report saying that even after all 21 million bitcoins are mined, the actual circulating bitcoins are unlikely to exceed 75%, because some of them have become "dead coins" for various reasons (lost private keys, etc.) and can never be used again. (Some researchers believe that lost bitcoins may account for 20% of the supply.)

So, according to the report, only about 15 million people can own a complete Bitcoin. In addition, considering some major Bitcoin holders, the number of investors who can own a complete Bitcoin in the future will not be very large. Does it make you feel a little panicked?

Because we always hear people lamenting, "Alas, I haven't gotten on the train yet." Only if you hold Bitcoin, you will really study and learn about it and master the rules of the bull market. Otherwise, whether the bull market comes or not has nothing to do with you. As far as I know, most of the friends who speculate in Bitcoin are still short-term traders and contracts, and the real long-term coin hoarders, that is, value investors, account for a small proportion. There is really no way to do this. The current market is still in a highly speculative and bubble stage. But after reading this report, you can seriously think about whether you want to hold Bitcoin.

Some long-term hoarders are usually out of strong curiosity about Bitcoin technology, and some are people who have a firm belief in Bitcoin and believe in market cycles. Why do many people recommend value investment in Bitcoin? Because for many people who are not particularly good at analyzing and predicting the market, the income earned from frequent operations may not be as much as the income you get from the high point at the long-term low point. Many people win 9 times out of 10 and lose the last time. Some short-term K-line analysis usually cannot predict the trend of the bull market. Sometimes the analysis should be put on a longer-term basis.

Finally, here is another piece of news for your reference. A recent study on the Bitcoin market is also based on the historical patterns of Bitcoin. One part of the study looks at Bitcoin’s performance on a quarterly basis, saying:

Historically, Bitcoin had a poor Q3 this year, with a return of -24%, the fourth worst quarterly performance since 2012. Historically, the fourth quarter is Bitcoin's best three months, with an average return of 112%, with only two years of negative returns in the past seven years (2014 and 2018). Seasonal effects on prices are well-accepted by investors in traditional assets, especially retail and other consumer spending-based industries, but it is unclear what macroeconomic seasonality affects Bitcoin's price.

According to this statement, I wonder if the price of Bitcoin will have an outstanding performance in the fourth quarter, the next less than three months? The above is just a reference.

Currently, Bitcoin is fluctuating around $7,900. Everyone should be cautious of investment risks. I hope that when the next bull market really comes, we can all sit firmly on the train.