Why is Bitcoin halving a big bull market? The answers are all here

Bitcoin has been a standout recently, doubling in just over a month from $4,000 at the beginning of April to around $8,000 at the time of writing. Bitcoin currently accounts for 59.5% of the total cryptocurrency market capitalization, up 10% since April, leading the entire cryptocurrency market.

This seems to indicate that the market is gradually recovering. There are many factors that can affect the price of Bitcoin, including policy, economic, technical, war and even the activity of dark web transactions. Let us put these factors aside for now and explore the impact of halving on the price of Bitcoin from the perspective of market cycle theory.

Regarding halving, first you need to know that each Bitcoin block currently produces 12.5 bitcoins, and the output is halved every four years. The next halving block reward will become 6.25 bitcoins.

There is a saying in the cryptocurrency circle that a new round of bull market will come after Bitcoin halving, and it will be a new round of unprecedented bull market. Why? Refer to the data of 2013 and 2017.

The first Bitcoin halving occurred on November 28, 2012. After the halving, Bitcoin reached its highest point after the first halving at $1,175 on November 30, 2013, which lasted 367 days.

But then it entered a long bear market in 2014 and 2015, reaching its historical despair point of $162 in August 2015, a 7.25-fold drop from its peak.

The second halving occurred on July 9, 2016. On May 20, before the halving, there was a surge in the price from $430 to $789.8. After the halving, it reached its peak of $19,891 on December 16, 2017, which lasted 525 days.

Observation data shows that the second time Bitcoin returned to its 13-year peak of $1,175 was on February 23, 2017, with a gap of 1,181 days.

The current estimated time for the next halving is May 23, 2020 , which is 374 days away , or more than a year. If calculated according to the market cycle theory, the first two halvings would have triggered a bull market in the second half of the following year.

Then the next bull market should start in the second half of 2021.

Someone has created a correlation model between halving and price based on the history of Bitcoin. According to this model, the next time Bitcoin halves, the price will exceed 10,000 US dollars, or even exceed 100,000 US dollars.

Of course, the above is just a judgment based on past data. According to the data, there is indeed a high correlation between the price of Bitcoin and halving. No one can accurately predict the market. After all, there are many factors that affect the price. Let’s discuss the impact of other factors below.

Policy

Policies will have a relatively large impact on Bitcoin, but from a historical perspective, if the currency is simply banned for a long time, it will not have much impact. Referring to the central bank's policy in 2013 and the seven-ministerial document in 2017, the policy negatives are basically seen as positives in the currency circle. However, if there is a major positive on the policy side, then it will definitely rise.

There is currently a situation with a major negative policy impact on Bitcoin. The country has completely banned virtual currency mining. Currently, the vast majority of Bitcoin computing power comes from China. If this happens, in order to cooperate with supervision, miners will have no choice but to move their mines or shut down. This will inevitably lead to a sharp drop in the computing power of the entire Bitcoin network, and the entire network will also face the risk of being attacked. Once a 51% attack occurs, the consequences will be very serious.

Economic aspects

When the economy is in a downturn, funds will seek multiple investment targets to cope with future uncertainties. Whether it is the stock market or other investment markets, when the overall trend is downward, people will take out funds and invest in other areas for diversified investment, and the cryptocurrency circle is one of the emerging investment markets.

The Cyprus financial crisis in 2013 was a classic example. In order to protect their property from being controlled by the Cypriot government, locals chose Bitcoin as an investment target to avoid the crisis. In such a major economic crisis, a currency that is not controlled by banks and the government will become one of people’s main choices. The same example is Venezuela.

Technical aspects

Currently, blockchain technology itself has received great attention from many governments and companies around the world. Major Internet companies including Facebook, IBM, and Microsoft are conducting their own research. In today's highly globalized world, the birth of emerging technologies often leads to competition at the national level, so the future of blockchain technology is unquestionable.

Some people may say that blockchain does not necessarily need "coins", but from the perspective of technology itself, public chains will be the mainstream, while private chains and alliance chains will be niche . Both the R3 Alliance and Hyperledger have high limitations and have not made much progress. There was even a quarrel between alliance members because of their competition for interests and voice.

Microsoft recently launched an open source decentralized identity protocol based on Bitcoin, but it is currently running on the Bitcoin test network. According to official instructions, it will be deployed on the Bitcoin main network after the test is successful. If this research direction is successful, a unified ID can be used on the Internet in the future .

The reasons why giants including Microsoft, Facebook, and JPMorgan Chase have turned to the public chain are obvious. Therefore, the public chain is the future, and Bitcoin, as the mother of blockchain and the recognized value storage target in the currency circle, will definitely have a higher value in the future.

In summary, this article first analyzes from the perspective of market cycle theory why some people say that halving will bring about a bull market, and then describes the impact of the above factors on Bitcoin from the policy, economic and technical perspectives. If you have other opinions on this, you are welcome to leave a message in the comment section at the end of the article.

Author: Big Cat in the Coin Circle

Source: Blockwave