In-depth Analysis of Bitcoin Halving and Market Cycles

The "Halving" of Bitcoin has an impact on the market that goes far beyond the accumulation and speculation emotions brought about by scarcity. In fact, halving means that Bitcoin production is reduced by half under the condition that the total network computing power remains unchanged. This leads to two possible scenarios:

1. If the total network hash rate is halved, the mining cost remains unchanged. However, due to expectations of a rise in Bitcoin and factors such as sunk costs of mining machines, the hash rate is likely to be higher than the level before the halving.

2. If the hashing power exceeds half of that before the Halving, the production cost of Bitcoin will increase. As the number of high-cost Bitcoins rises, the price is pushed to a peak. This explains why the peak of the Bitcoin bull market usually occurs more than a year after the Halving.

Therefore, the halving driving the bull market is not only influenced by emotional factors but also by cost factors. Of course, costs cannot completely determine prices, especially for cryptocurrencies.

Litecoin ( LTC )'s performance during the 2023 Halving was not as good as in 2019, raising concerns about the effects of this round of Bitcoin Halving. However, the price peak of LTC before the 2019 Halving coincided with the Federal Reserve starting to cut interest rates, a factor that cannot be ignored.

In fact, the bull market cycle of Bitcoin may have always been influenced by macroeconomic cycles. Observing the past few rounds of bull markets, we can find some correlation between Bitcoin peaks and the peaks of the growth rate of the US M2 money supply, as well as macro events such as US elections. This suggests that the design of Bitcoin may have taken into account US policies and economic cycles.

U.S. elections usually occur near the peaks of M2 growth rates, reflecting a tendency to adopt loose monetary policies during election periods. This monetary easing policy increases market liquidity, and some funds inevitably flow into speculative markets.

Looking ahead, the Bitcoin bull market will still be influenced by both the Halving and macro factors. The Federal Reserve will eventually lower interest rates, and the dollar liquidity will shift from tight to loose. However, considering the current economic environment, the bull market cycle may be delayed until around 2026.

For investors, timing the bottom requires more patience. Pay attention to the two turning points that the Federal Reserve's dot plot may reveal: stopping interest rate hikes and starting to cut rates. However, even in the early stages of rate cuts, risks in a high-interest-rate environment still exist. Certain altcoins may present opportunities in the short term, but long-term investments should still be approached with caution.