The fourth halving is imminent, and the Bitcoin and encryption industries will "repeat yesterday's story"?

With the continuous transformation of the 'atypical bear market', the timeless narrative of 'halving' in the cryptocurrency world is gradually approaching - currently, about 9 months remain until the fourth Bitcoin halving,It is expected that on April 26, 2024, the time zone reward will be reduced from 6.25 BTC to 3

With the continuous transformation of the 'atypical bear market', the timeless narrative of 'halving' in the cryptocurrency world is gradually approaching - currently, about 9 months remain until the fourth Bitcoin halving,It is expected that on April 26, 2024, the time zone reward will be reduced from 6.25 BTC to 3.125 BTC.

Everything in the past is a preface. As one of the most important narratives in the encryption industry, "halving Bitcoin" has always been a good medicine to boost market confidence,Now that the bear market is faintly audible and the footsteps of the bulls are uncertain, will this round of halving cycle continue to hold the same rhythm as before?

01
The historical cycle of halving

After halving twice in the short term, there was a short-term decline accompanied by excessive profits, but then the adjustment was completed and the long-term upward trend emerged

However, starting from the third halving in 2020, due to significant improvements in industry employment, market attention, and supporting infrastructure compared to before, Bitcoin is no longer limited to niche products in the geek community, and has begun to interact with more external factors.

Simply summarize:

Half the first two times(2012, 50BTC to 25BTC; 2016, 25BTC to 12.5BTC)Previously, geeks in the circle were more concerned about the possibility of Bitcoin as Electronic cash;

Cut in half for the third time(From 12.5BTC to 6.25BTC in 2020)During the cycle, the focus on Bitcoin shifted to its attribute as a payment tool, which also sparked a series of controversies (the subsequent BCH bifurcation was almost the top stream within the circle);

In the fourth halving cycle (from 6.25 BTC to 3.125 BTC in 2024), Bitcoin has become an alternative asset, with a focus on traditional institutions and capital layout becoming the main theme;

Half the first two timesCut in half for the third timeCut in half for the third time

Under the influence of macro factors, from March 12th to March 13th, the two months before the halving on May 11th, Bitcoin began a downward trend from $7600, first falling to a fluctuating $5500. Subsequently, the market broke through the support point all the way down, reaching a minimum of 3600 US dollars. The overall market value quickly evaporated by 55 billion US dollars, and the entire network sold out over 20 billion RMB, accurately achieving a "price halving".

However, after halving in May, DeFiSummer began a new bull market cycle, and Bitcoin also surged to $60000, nearly 20 times higher than its lowest point before the halving.

Overall, according to the law of halving cycles in history, from a traditional perspective, when Bitcoin is halved, the price will return to half of the previous bull market price

After halving, there is a high possibility of starting a new bull market cycle, and it may be difficult to achieve a growth rate of more than 10 times in the current volume. However, surpassing the high point of the previous bull market by $60000 is still quite worth looking forward to.

02
New variables that are identical and different

However, at the same time, in the context of Bitcoin having undergone three halvings, with block rewards reduced to 6.25 and over 19 million excavated, it is actually time to reconsider many situations and things from a new perspective.

Especially in addition to the halving of Bitcoin in this round, there have been some noteworthy new variables in the entire industry and Bitcoin itself compared to previous halvings.

(1) Ethereum PoW to PoS

First of all, Ethereum completed the transformation from PoW mechanism to PoS mechanism last year. Now, as the two currencies with the largest market value in the crypto world, Bitcoin and Ethereum have become the leading currencies representing PoW and PoS respectively, thus bringing the competition between the two into a new era.

After being transferred to PoS, the newly added Ethereum will only be output from PoS pledge. According to current data estimates, after Ethereum upgraded to PoS mechanism at The Merge, the newly added Ethereum in PoS is theoretically about 660000 pieces per year.

However, according to the data of ultraground.money above, since The Merge, the circulation of Ethereum has not increased, but has decreased by nearly 300000 pieces, completely entering the era of deflation, and the current annual deflation rate is 0.289%.

In addition to the support of on chain destruction after the upgrade of Ethereum to London in 2021,More importantly, Ethereum produces far less ETH per year under the PoS mechanism than the PoW mechanism:

Under the PoW mechanism, nearly 5 million ETHs are produced annually, equivalent to nearly 8 times the PoS mechanism (660000 ETHs). If estimated according to this data, Ethereum will still be in inflation, and the annual inflation rate will be as high as 3.26%.

So Ethereum PoW to PoS, combined with the support of destruction on the chain, has successfully entered the era of deflation. Compared with the effect of halving Bitcoin, the impact of the supply side is undoubtedly more direct, to some extent, it will weaken the attraction of halving Bitcoin, which is also one of the biggest variables compared with the previous halving.

(2) Fee income

According to the halving rule of Bitcoin, the initial block reward is 50 Bitcoins, and the rule is to halve every four years. Currently, it has been halved three times to 6.25, and the next halving will be in 2024, which will continue to decrease. By 2140, Bitcoin will no longer have block rewards;

And the handling fees will always exist, so with a round of halving, the block rewards will gradually decrease or even approach zero, and in the future, the income of miners will become very single, only the handling fee rewards.

Since the beginning of this year, the prosperity of the Bitcoin ecosystem, especially BRC20, has sparked a new wave of "BitcoinFi", with the activity of internal transactions in the Bitcoin ecosystem reaching a new peak, thereby boosting the surge in transaction fee revenue for Bitcoin.

Source: https://www.oklink.com

The profit from BTC mining fees on May 8th reached a new high in nearly five years, reaching 68336 BTC (approximately $19.08 million), accounting for 40% of the miners' total income on that day.

2% 8% 2%

Source: https://www.oklink.com

But as the subsequent block rewards gradually decrease until they reach zero, the importance of handling fees will increase until they eventually become the sole source of income.

And the BRC20 in the first half of this year is equivalent to a preview in advance. Regardless of whether it is successful or not, with the subsequent halving of Bitcoin, the exploration on this path is bound to receive more attention.

03
How much will this halving affect?

In fact, in addition to the halving of Bitcoin, after Ethereum switched to PoS, the old Tokens that started using PoW mechanism this year are also facing their own "halving" nodes:

Litecoin has the latest time node, and is expected to be halved on August 3 this year

BCH, on the other hand, is expected to halve on April 5, 2024, similar to Bitcoin's timeline,The block reward has decreased from 6.25 to 3.125, and BCH has also experienced a significant increase recently.

This also provides enough room for imagination to halve Bitcoin in 2024, and the industry's capital has always enjoyed collective gambling on the "halving event". Factors such as increasing computing power, new hardware, and upcoming halving of rewards will determine the overall growth of the industry and Bitcoin, and even more so today:

The difficulty of mining has significantly increased by 6.45% to 53.91T, setting a new historical high and almost doubling compared to a year ago.

But against the backdrop of the big issue of carbon neutrality and the skyrocketing global energy prices since the beginning of this year, the biggest narrative difference between PoS and PoW is that PoS networks consume less energy and are "more environmentally friendly".

Up to now, Cryptocurrency based on PoW has been characterized as a commodity, in line with the old regulatory rules, while PoS currency has the regulatory risk of being characterized as a security.

04
Summary

Overall, we are currently at the waist of a new round of halving cycle - there is still a window period of more than half a year before the Bitcoin halving node, and there may be a reaction period of one to two years before the market reaction after the halving occurs.

This may also be the first (or second) time that the vast majority of practitioners and investors in this round have witnessed and experienced the "grand event" of halving Bitcoin, and it is still unknown how Bitcoin and the current cycle will proceed after the halving.