Discussing the Impact of Bitcoin Halving on the Market and Macroeconomic Factors

The "Halving" event of Bitcoin is not merely driven by scarcity; there is a deeper logic behind it. The so-called "Halving" actually refers to the halving of production. While the same computational power cost is invested across the network, the number of Bitcoins produced is reduced by half.

If the total network hash rate halves, the mining cost of Bitcoin may remain unchanged. However, due to factors such as market expectations and mining machine costs, the actual situation may be that the hash rate will be higher than before the halving. This means that as long as the hash rate exceeds half of what it was before the halving, the production cost of Bitcoin will rise. As more high-cost Bitcoins are mined, their price will also be pushed to higher levels. This explains why the peak of the Bitcoin bull market is usually not around the halving, but more than a year after the halving.

Therefore, the logic of "Halving" driving the bull market is not only emotional factors but also cost factors. Of course, costs cannot fully determine prices, especially for cryptocurrencies, where it is not uncommon for prices to fall below costs.

There are opinions that the performance of Litecoin in 2023 during the (LTC) Halving is not as good as in 2019, which may indicate that this round of Bitcoin Halving will also not perform well. However, we need to note that in June 2019, the price of Litecoin reached its peak, which coincided with the time when the Federal Reserve started lowering interest rates. This suggests that, in addition to the Halving factor, the macroeconomic environment also plays an important role.

Although some investors dismiss macroeconomic factors and believe that Bitcoin has historically had a low correlation with the US stock market, in fact, Bitcoin may have always been influenced by macro cycles. We can observe that several peaks in Bitcoin's bull markets are not only related to the Halving cycles but also have some correlation with the peaks in the growth rate of the US M2 money supply and the US election cycles.

This design may not be a coincidence. The mechanism of Bitcoin halving every four years is likely to have considered the policies and economic cycles of the United States. Recent U.S. elections often occur near the peak or second peak of the M2 money supply growth rate, which indicates a phase of accelerated monetary easing. A relatively loose monetary policy during the election period may benefit economic prosperity, but it can also lead to ample dollar liquidity, with some funds flowing into speculative markets.

Looking ahead, the bull market for Bitcoin will continue to be influenced by both the Halving and macroeconomic factors. The Federal Reserve will eventually lower interest rates, and the liquidity of the dollar will shift from tightening to easing. However, due to macroeconomic factors, the next bull market may be delayed until around 2026.

For investors, some patience may still be needed at this time. We need to pay attention to the Fed's dot plot, which may reveal two important turning points: the halt of interest rate hikes and the beginning of rate cuts. Although these turning points may bring a short-term emotional rebound, caution is still warranted considering that the M2 money supply in the U.S. has seen negative growth for the first time, and high-interest loans are entering a repayment pressure period. In the short term, there may be speculative opportunities in certain small-cap coins, but from a long-term perspective, extra caution is still necessary.