Original author: Jaleel
原文来源:blockbeats
At 8:15 a.m. on April 20, Bitcoin completed its fourth halving as the Bitcoin network reached block 840,000. Before the halving, Bitcoin miners were rewarded with 6.25 BTC for each block successfully mined, and after the halving, that number dropped to 3.125.
As the originator of the crypto industry, every halving of Bitcoin has attracted the attention of investors and market analysts around the world. Bitcoin halving is a core mechanism that aims to control its supply by reducing mining rewards, ensuring the scarcity and value of Bitcoin. This process happens automatically every four years, halving the amount of newly minted bitcoins each time until the total number reaches 21 million. This mechanism not only reduces the speed of new bitcoin issuance, but also effectively curbs inflation.
Since the birth of Bitcoin in 2009, the mining reward has been reduced from 50 BTC per block to 3.125 BTC, experiencing four halves. Previous halvings have significantly increased the market value of Bitcoin, as the reduced supply has pushed up the price while demand remains the same. The next halving is expected in February 2028, when the block height will reach 1,050,000. This point in time depends on the actual mining speed of the block, although the mining algorithm targets a block time of 10 minutes, and the actual time may fluctuate.
How is this halving different from the past?
Recall that the last round of halving of the crypto bull market was a bull market in which the dollar was released.
At the beginning of 2020, the new crown epidemic struck, and the US economy suddenly declined, and the unemployment rate soared. Against this backdrop, the Federal Reserve launched a combination of "zero interest rate + quantitative easing" monetary policy tools, that is, the lower bound of the federal funds rate was sharply lowered twice in a row, from 1.5% to zero, and announced unlimited purchases of Treasury bonds and MBS (mortgage-backed securities). This is the Fed's second large-scale monetary easing process after the "subprime mortgage crisis" in 2008.
As a result of that monetary "de-escalation", the Fed's balance sheet expanded 1.1-fold in 26 months, from $4.2 trillion at the end of January 2020 to $9 trillion at the end of March 2022, an increase of $4.8 trillion. The sheer scale of the "water release" far exceeded that of the 2008 sub-credit crisis. More importantly, after these two monetary "releases", there was a significant difference in the trend of prices, an important macroeconomic indicator. In the same year, the Russia-Ukraine conflict triggered a rapid rise in global energy and food prices, which also played a role in fueling the fire.
When there is more hot money in the US dollar, it will inevitably flow to various markets around the world, including Bitcoin.
Bitcoin rose by more than 300% in 2020 and rose by almost 50% in December alone. Since then, Bitcoin has surged more than 120% since the beginning of 2021, hitting a then-high of nearly $65,000 in mid-April, kicking off a rollercoaster ride.
U.S. cryptocurrency exchange Coinbase went public in April with a valuation of $86 billion on its first day, making it the largest crypto company to date. By May, the price of Bitcoin had a 35% decline before surging to an all-time high of $69,000 in November.
The rise of the Bitcoin ecosystem
In addition, we can see that there are more transaction scenarios on Bitcoin since last year compared to the past, and the Bitcoin ecosystem provides new revenue opportunities for miners.
Since the beginning of 2023, the Bitcoin ecosystem has been revitalized after the NFT protocol "Ordinals" created by software engineer Casey Rodarmor was officially launched on the Bitcoin mainnet. The popularity of the Bitcoin ecosystem has increased the income of miners a lot, so there have been rumors that miners are the main driving force of the Bitcoin ecosystem, and many people half-jokingly say that "the Bitcoin ecology is a conspiracy of miners". On this issue, Jademont, CEO of Waterdrop Capital, expressed his opinion to BlockBeats: "This is not a conspiracy at all, but a conspiracy of the miners. 」
In Dashan's view, as an important participant in the Bitcoin ecosystem, miners are very motivated to do a good job in the Bitcoin ecosystem, or increase profits by building the Bitcoin ecosystem. It's just that in the past, Bitcoin's infrastructure wasn't enough to support it to do anything other than mining and transferring. But the 2021 Taproot upgrade gave Bitcoin a better scalability and variability enhancement. Technically, it makes it possible for Bitcoin to do some innovation and application. The birth of Ordinals and the emergence of new technologies such as PBST and MAST are all thanks to the Taproot upgrade. This has also led to the development of various sidechains and layer 2 (L2) solutions, such as RGB, the Lightning Network, and BITVM, which are developments that miners want to see and actively promote.
Oyama also mentions some concrete examples of miners' active participation: "US mining giant Marathon Digital has released its own Bitcoin Layer 2 network, which clearly demonstrates the contribution of miners to the development of the ecosystem. In addition, several EVM-compatible Layer 2 projects we have invested in, such as Merlin, BEVM, and BSquare, have received strong support from miners, helping these projects achieve rapid growth in TVL. This is not only because miners own a large amount of idle Bitcoin, but also because they are very willing to build an infrastructure in the Bitcoin ecosystem that is comparable to Ethereum Layer 2. 」
Looking at the on-chain data, while the overall crypto market is not doing well, the trading volume on Bitcoin has been extremely active since April, and gas fees have been on an upward trend. This also means that after two low periods, the third wave of the Bitcoin ecosystem is coming.
In the third wave of the Bitcoin ecosystem, the community is not only beginning to realize that the Bitcoin ecosystem still lacks richer and more advanced infrastructure. In order to meet the growing demand, the Bitcoin ecosystem has begun to move towards a more "virtual to real" development path, including Bitcoin Layer 2, Bitcoin DeFi, and Bitcoin cross-chain technology, which together form the BTCFi ecosystem.
On the other hand, the Runes protocol is also the main force of this wave. As the "singularity" of the "Big Bang" of the Bitcoin ecosystem, Casey's influence is unparalleled in the entire Bitcoin ecosystem, and as a sibling protocol of the Ordinals NFT protocol, the Runes protocol used to issue coins has a strong consensus itself. The Runes protocol itself carries a strong consensus foundation, and as this consensus continues to strengthen, the increase in asset value has become a market consensus.
As more Layer 2 solutions and DeFi applications in the Bitcoin network grow, miners can earn transaction fees by participating in transaction validation and network maintenance on these platforms. This not only opens up new revenue streams for miners, but also drives further optimization and functional expansion of the Bitcoin network.
The West dominates the market
In January 2024, the U.S. Securities and Exchange Commission (SEC) approved the listing of Bitcoin spot ETFs, which had a profound impact on the price action of this crypto bull run and Bitcoin after the halving. In the past, Bitcoin's complexity and lack of support from the traditional financial industry have shrugged many investors, especially retirees. Now, with the entry of heavyweight financial institutions such as BlackRock and Fidelity Investments, Bitcoin is gradually gaining recognition in the mainstream market.
In addition, Bitcoin ETFs not only provide an investment channel that follows traditional financial norms, greatly simplifying the process of investing in Bitcoin, but also provides a safe way to invest in compliance with regulations. It enables large investors such as hedge funds, pension funds, family offices, and sovereign wealth funds to invest in Bitcoin with greater confidence while complying with their own investment policies and risk management requirements. While the listing of an ETF won't immediately make Bitcoin accessible to all investors, it does significantly reduce the difficulty of entering the market.
The impact of Bitcoin ETFs is already starting to be felt, especially against the backdrop of surging demand. The Bitcoin ETF, issued by BlackRock, attracted $10 billion in the first seven weeks alone, setting an all-time high for financial product issuance. This achievement was achieved just over two years after the first gold-backed ETF was listed in 2004. Currently, all Bitcoin investment products in the world control more than 1 million Bitcoins, representing 5% of the circulating supply.
On the other hand, Bitcoin's player base is growing. Canada, the United States, and Hong Kong have successively approved Bitcoin ETFs, and while Hong Kong's ETFs have not directly contributed to the price of Bitcoin, it reflects that Bitcoin has been officially recognized as an investment good. As a result, more and more people are starting to get involved by buying Bitcoin or investing in Bitcoin-related mining rigs and other ecosystems. In general, the consensus of Bitcoin is increasing, the number of participants is increasing, and the opportunities and amount of funds are expanding.
This also means that the demand for Bitcoin ETFs may far exceed the existing supply. In the first few months, the daily purchase of ETFs was 10-12 times the amount of new mining output per day. If this strong demand continues, the market impact of Bitcoin ETFs could outweigh the significance of the halving.
The East has "stepped down" from the altar of mining
After talking to friends who are very familiar with the mining industry, BlockBeats found that the difference between this halving and the last time in 2020 is that the structure of the mining industry has changed dramatically. "At the time of the halving in 2020, China still controlled more than 60% of the world's computing power. Today, China is no longer involved in the industry. 」
Looking back at the market reaction after the last halving: the price of the currency has risen, the market activity has increased significantly, and the price of mining machines has also risen. Miners are actively entering the market, and the mining boom is no different for a while. At that time, the market turmoil and mood swings were vividly manifested in the drive of the halving. However, this time the situation is very different after the halving, and the lack of support from Chinese mines has made it seem as if the mining rigs have nowhere to go.
He continued, "During the previous halving, many old miners moved from Inner Mongolia and Xinjiang to Sichuan to take advantage of local hydropower resources. This periodic migration and equipment refresh used to be the norm in the industry. But with this halving, we're faced with an unprecedented situation – both new and old machines are struggling to find the right footing, forcing the industry to do a wider range of equipment updates. 」
A former mine in Sichuan, source: Caixin
In the early days of Bitcoin mining, miners behaved much like traders in the stock market: when the market was bullish, they would rush to buy mining rigs, and when market sentiment was low, they might deactivate equipment. We can see that many mines have opted out during the market downturn, and some have even felt extremely frustrated and started to sell their assets at a low price. However, with the development of the mining industry, most miners have been digging even in a bear market, but may have suspended their original expansion plans.
For today's miner market, there is little new entry in the market, especially domestically. Mining now almost needs to go overseas, which is too high a threshold for domestic miners.
In Dashan's view, the change in the mentality of miners in Bitcoin mining has been particularly significant in recent years, especially since the implementation of the mining ban in China in 2021. Before the mining ban in 2021, miners were in a very comfortable state, lying down every day to earn bitcoins. But after 2021, the state of the miners is basically two, either completely lying flat and quitting the industry, or they are already lying flat and are forced to go overseas for various tosses.
"The final pattern is that small and medium-sized miners have basically been eliminated, and many have changed from miners to coin hoarders and buyers of cloud computing power. Oyama said to BlockBeats.
Therefore, against this backdrop, Dashan does not recommend that small-scale miners or small-scale mining projects enter the market now, unless there is a clear advantage in terms of energy. "Because mining is essentially an energy game, small players have no advantage in terms of energy. If you are optimistic about the future prospects of Bitcoin, buying Bitcoin directly or adding a very low leverage is actually similar to mining, but do not increase the leverage. 」
How much does the halving affect the price?
Not only does the Bitcoin halving have a significant impact on miners, the cost of acquiring Bitcoin increases for them. At the same time, the halving is also seen as a catalyst for the growth of the value of Bitcoin investments. Looking back at the previous halvings of Bitcoin, we can see that the price of Bitcoin has risen significantly in the six months since the halving.
First halving (November 28, 2012): At the time of the first halving in 2012, the market price of Bitcoin was around $12. This event sparked concern in the market, and in the following six months, the price of Bitcoin increased almost tenfold to around $130. This significant increase reflects the strong impact of the halving on market psychology and investor behavior.
Second halving (July 9, 2016): By the second halving in 2016, the price of Bitcoin had stabilized at around $660. Within half a year of the halving, the price steadily rose to $900. During this period, Bitcoin's maturity and market acceptance have increased significantly.
Third halving (May 11, 2020): The third halving took place in 2020 when the price of Bitcoin was $8,600. As the global economic environment changed and wider market acceptance grew, Bitcoin doubled in price over the next six months to break above $15,700.
Source: TradingView.com
Recently, the global crypto market has been affected by many aspects, especially the interference of the war factor, which has led to an unusually weak market performance. In this context, the price volatility of bitcoin has become a hot spot for investors and traders. Top traders and the so-called "leading gods" have a wide range of differences on the future direction of the market, and their predictions are full of uncertainty.
But in the midst of all this chaos, how do miners see the future of Bitcoin? Friends who know a lot about the mining industry told BlockBeats that the current situation is clearly not a real bull market. "Mining rig manufacturers now sell machines almost at cost price, and mainstream mining equipment has not yet been updated. The share of electricity bills has reached more than 60% after the halving, which is clearly not a sign of a bull market. A real bull market should be one where the miners are reasonably profitable and the miners' electricity bills can be reduced to 10% to 20%. 」
Regarding the long-term forecast for the price of bitcoin, he remains cautious and optimistic: "I think there is a high probability that bitcoin will reach $100,000, although this is only speculation based on the analysis of the past and present share of electricity bills. If we were to predict the timeframe that the price of bitcoin could reach, I would estimate it between the end of this year and the first half of next year. Of course, this is still just speculation based on historical data, and the actual movement of the market may vary. 」
In addition, as a joint venture and crypto OG of Yuchi, Shenyu assessed in May last year that it was in the "early stage of the bull market" at that time, and the absolute bottom of the bear market had passed, believing that the cryptocurrency industry was in a state of finding a new narrative logic and development.
Now, nearly a year later, Shenyu said in a recent interview, "Looking at this cycle from the current stage, it is likely that it is in the middle of the bull market, the market has begun to pick up, and has found a new narrative logic, but it is not yet in a state of very high leverage and FOMO. 」
However, Shenyu also reminds readers that since the market is a dynamic, multi-party complex system, relying only on a single indicator or historical data to predict the top of the market is often not suitable for the current situation. He suggested that the best course of action is to continuously monitor market developments and rebalance and reallocate assets when a certain stage is reached. This approach can help you maintain a stable mindset when the market is falling rapidly or entering a bear market, and may boost their absolute returns.
Again, although in the short term, due to the factors of the war and the impact of the correction of US stocks, bitcoin was dragged down. But the price trend of Dashan Bitcoin is also very optimistic and firmly bullish. "We feel that there is a very rare pullback before the halving, which is very healthy for the whole Bitcoin trend. Another breakout of the previous high is just around the corner, as the fundamentals are not deteriorating at all, or even getting better. 」
As for the specific price forecast, Dashan expressed great confidence: "There will be no problem with the previous high of more than 70,000, the key point is about 100,000. 100,000 is a psychological threshold, and there will be many people who will pay chips around 100,000. After the ETF passed, the trading volume of bitcoin did not increase significantly, but we believe that when it approaches $100,000, the trading volume will increase, and at this psychological threshold, many old leeks and long-term coin holders will sell. It is precisely this time that is the best time for traditional investors to enter the market, because they can eat a large number of goods in this vicinity without pulling plates. 」
Under Dashan's prediction, the $100,000 million in bitcoin may be the real starting point of this bull run. It is difficult to say with certainty whether the price will rise further to $150,000 or $200,000, but $150,000 is very likely, and $200,000 is not impossible.