Countdown to 100 days! Changes and changes in Bitcoin's "Halving narrative".

Author | Terry

Produced by vernacular Blockchain

With less than 4 months left until the fourth BitcoinHalving, which is expected to be April 23, 2024, the Block Reward will drop from 6.25 BTC to 3.125 BTC.

As one of the most important narratives in the crypto industry, “BitcoinHalving” has always been an important stimulus event that the market has great expectations for, facing the end of a new round of Halving cycle, what should we expect, and what new variables have emerged in the market?**

Source: OKLink

01. What is the impact of the Halving on the crypto market?

For the crypto industry, each round of Halving is a grand event, especially the first two Halving cycles of Bitcoin, which have seen dozens of times an astonishing increase (in the short term, after the two Halving, they are accompanied by a short-term decline in the bullish market, but then the adjustment is completed and out of the long-term upward market).

**However, since the third halving in 2020, due to the number of industry employees, market attention and the perfection of supporting infrastructure have been significantly improved compared with before, Bitcoin is no longer a niche product limited to geek circles, and has begun to link with more external factors. **

To summarize simply:

Before the first Halving, geeks in the circle were more concerned about the possibility of Bitcoin as electronic cash;

During the second Halving cycle, the focus on Bitcoin shifted to its nature as a payment instrument, which also sparked a series of debates (the subsequent BCH fork was almost the top stream in the circle);

In the third Halving cycle, Bitcoin has become an alternative asset, and focusing on the layout of traditional institutions and capital has begun to become the main theme;

Therefore, compared with the first two Halving, the third Halving of Bitcoin is also unprecedented, and at the same time, the overall political and economic environment of the world during the third Halving of Bitcoin has also affected its performance:

Under the influence of macro factors, from March 12 to March 13, two months before the May 11 Halving, Bitcoin began to decline from $7600 and first fell to $5500. Subsequently, it broke through the support point all the way, the lowest fell to $3,600, the overall Market Cap evaporated by $55 billion in an instant, and the whole network got liquidated more than 20 billion yuan, accurately achieving “price Halving”.

However, after the Halving in May, Decentralized Finance started a new Bull Market cycle in the summer, and Bitcoin also soared to $60,000, nearly 20 times more than the lowest point before the Halving.

**Overall, from historical experience, it is very likely that a new Bull Market cycle will start after the Halving, and it may be difficult to achieve more than 10 times the increase in today’s volume, but the $60,000 above the high of the last Bull Market is still quite worth looking forward to. **

In addition, it is worth noting that before each BitcoinHalving, listed mining companies are also the best “self-leveraged” related targets:

Among the listed mining companies, there are 15 miners currently listed on the NASDAQ and Toronto stock exchanges, of which MARA, as the leader, has risen for 11 consecutive trading days, up more than 100%, with a total increase of more than 800% this year, and Riot has also risen by more than 400% this year, while Bitcoin has only risen by about 160% over the same period.

02, new variables other than Halving

However, at the same time, in the context that Bitcoin has undergone three halves, the block reward has been reduced to 6.25, and the number of mined has reached more than 19 million, in fact, many situations and many things have come to rethink from a new perspective.

**In particular, the industry as a whole and Bitcoin itself have seen some new variables worth paying attention to compared to previous Halving. **

1) Incremental Fund Impact of Spot ETFs

The core factor of the market rally in the past two months is the expectation of “SpotBitcoin ETF”.

In terms of the established timeline, the most recent Node of the SpotBitcoin ETF application results is January 10, 2024: the final decision will be made on the ARK 21Shares Bitcoin ETF, which has already experienced two delays.

In addition, from January 14 to 17, 2024, there are also 7 SpotBitcoin ETF applications that will usher in the time Node for the SEC to make a decision, but according to past practice, it is likely to continue to be postponed to the last time window in mid-March.

**However, even if it is postponed again to mid-March, the dust will finally settle before the BitcoinHalving in late April, which means that the final decision on Spot ETF will be Node sooner than BitcoinHalving. **

Once the ETF passes, superimposed on the Halving event, Bitcoin may start a new cycle under the impetus of double favourable information, even if it is not as expected, it can also play a certain Hedging Around.

In addition, in fact, there is already an expanding “quasi-Bitcoin ETF” in the market - aside from the exchange as a custodian, the company entity that currently holds more than 100,000 Bitcoin, in addition to Block.one and the long-defunct Mt. Gox, the third place is MicroStrategy.

As a veteran of Bitcoin, MicroStrategy’s buy-buy-buy strategy for Bitcoin has long been a big-handed strategy, and its public purchase of Bitcoin can be traced back to August 11, 2020, and this month MicroStrategy and its subsidiaries bought about 14,620 Bitcoin for about $615.7 million in cash:

The average purchase price is $42,110, and as of December 26, 2023, MicroStrategy holds 189,150 BTC at an average purchase cost of $31,168.

It should be known that the total Market Cap of MicroStrategy’s stock is only $9 billion, of which Bitcoin assets account for $6 billion, which means that 2/3 of the net assets can be understood as the value of Bitcoin, which has led many investors to allocate MicroStrategy as a “quasi-Bitcoin ETF”.

2) The internal evolution of the Bitcoin ecosystem

According to Bitcoin’s Halving rule, the Block Reward started with 50 Bitcoin, the rule was Halving every four years, and it has been Halving three times at 6.25, and so on, until by 2140 there will be no more Block Reward Bitcoin;**

The fee will always exist, so with a round of Halving, the block reward will gradually decrease or even close to nothing, and the income of miners will become very single in the future, only the fee reward.

Since the beginning of this year, the prosperity of the Bitcoin ecosystem, especially BRC20, has set off a new wave of “BitcoinFi”, and the activity of transactions within the Bitcoin ecosystem has reached a new peak, thereby boosting the surge in Bitcoin’s fee income.

In this context, protocol innovations such as Ordinals have been accompanied by leading projects such as ORDI and SATS, which have deeply affected the fee model of the Bitcoin network in Depth - most directly, it has completely changed the economic model and incentive model of Bitcoin. **

Dune’s latest data shows that as of December 29, the cumulative cost of Ordinals inscription minting exceeded 5,135 BTC, more than $200 million.

This has also helped BTC Mining fee income hit a new record high in the past five years, which has been around 2% in the past three months, while the historical average of Miner fee income has often accounted for only about 2%, while the average figure in the past three months has reached a record of about 8%.

** As the subsequent block reward gradually decreases to zero, then the fee becomes more and more important until it eventually becomes the only source of income. **

Therefore, this round of BRC20 is equivalent to a rehearsal in advance, and whether the follow-up is successful or not, with the occurrence of subsequent BitcoinHalving, the variables on this path are bound to profoundly change the overall rate model of the Bitcoin.

03, Summary

In addition to the ETFs and the Ordinals wave, the two major variables, there are some positive potential variables that have not been seen in the previous Halving cycle that are rapidly advancing and may affect the new round of market evolution.

**On the one hand, the Bitcoin bond “Volcanic Bond” has been approved by the Salvadoran Digital Assets Commission and is expected to be issued in the first quarter of 2024. **

This is also the first Bitcoin-focused national bond issuance, half of the funds raised by the bond will be used to buy Bitcoin and hold it for five years, and the rest will be used to fund Bitcoin-related construction projects.

On the other hand, the Ordinals wave has introduced a huge amount of funds, users, and developers into the Bitcoin ecosystem through the channel of inscriptions:**

If the previous Bitcoin only had the advantage of “Taoist cognition” and total Market Cap, the inscription tide directly and greatly improved the richness of new assets in the Bitcoin ecosystem, and the human demand for new assets is eternal, and it also indirectly increases the number of developers and the user base.

At the same time, new innovations such as RGB protocol, Slashtags (identity accounts, contacts, communication, and payments in the BitcoinLighting Network ecosystem), Impervious browser that integrates many P2P services, Taro, a Taproot-based asset protocol, and OmniBOLT are all worth looking forward to.

Overall, although the footsteps of the Halving are getting closer and closer, the expansion of Bitcoin in all dimensions has obviously ushered in almost all new variables, and even once overwhelmed the attention of the Halving, as for where these new variables will eventually lead Bitcoin, it is worth looking forward to.