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Half-cutting market: You need to be clear about what rhythm means money, whether it is the little hand tickling, the strings trembling, or the bow dancing, and the up and down.
Current market situation: There is only one big cake here. The ideal country of finance is Plato, but people have turned it into an Indian flying cake or even a cyberpian cake.
ETF effect: “Moxisha” is called “King of Water Planting” because it produces high quality goods. This name is very frightening and has a lot of gimmicks. Even if you know it is difficult to increase, the raw material price will not be too low. There is no other reason., easy to sell.
Capital entry: The story of a chopstick is not about struggle from beginning to end. It is important to recognize your own strength, and it is more important to understand what you are facing.
To individual investors: The probability of your encounter with aliens is about one in 7 billion, and your success rate of creating alien creatures is 50%.You always think that the technology level limits your imagination, but in fact, you don’t see clearly. Investing is a game of probability.
As Bitcoin completes halving, the four-year “storm time” of the crypto world has officially begun.
Many people will regard “halving” as an opportunity. Those K-lines that break the top meet the time nodes of the halving cycle, which strengthens the correlation between the two with the support of the logic of supply and demand relationship.As the Bitcoin market structure changes, the time node in which this halving cycle is located is also supported by many external factors.This article will discuss them in depth one by one and find out how investors can deal with this halving cycle.
Why cut it in half?
First, we need to figure out why Bitcoin needs to be cut in half.
Half is an incentive for the Bitcoin network to halve.In the Bitcoin network, miners need to do a lot of hash calculations to find a hash value that meets certain criteria in order to package new transactions into blocks and add them to the blockchain.The first transaction of each block of Bitcoin will generate Bitcoin, and the miner who successfully finds the correct hash will receive a Bitcoin reward.
(Figure 1: Recent block production and rewards of Bitcoin network, Mempool)
Satoshi Nakamoto hopes to make Bitcoin a scarce resource like gold through the halving mechanism, and provides a way to allocate monetary units to circulation watersheds without involving the issuance of currencies by centralized institutions.The two have similarities in mining and supply modes.Gold mining requires expensive equipment and equipment, paying high labor costs and transportation costs, obtaining rewards from gold mines (gold) and injecting them into the market.As the amount of gold being mined increases, the difficulty of mining unborn gold has also increased significantly.In the Bitcoin network, miners consume resources (CPU and electricity) to process transactions, obtain BTC incentives, and ultimately inject them into the secondary market.
After this halving, the block reward will change from 6.25 BTC to 3.125 BTC.The impact of miner’s income needs to be discussed from different stages.For example, after the first halving, the number of bitcoins miners received decreased from 50 to 25, and then the price of bitcoins rose from a few dollars to hundreds of dollars. The income of miners increased, and the sharp increase in the price compensated for the halving.Influence.The emergence of the inscription in 2024 provides an additional source of income for Bitcoin miners.
In addition, the Bitcoin network has a built-in difficulty adjustment mechanism, which will deal with changes in network computing power (hash rate) by dynamically adjusting the mining difficulty, thereby maintaining the miner’s income level.The difficulty adjustment mechanism takes 2016 blocks (about two weeks) as an adjustment cycle, and adjusts it according to the actual block production time of the previous cycle. If it is lower than two weeks, it will increase the difficulty (up to 4 times), and if it is higher than two weeks, it will reduce the difficulty (up to 75%).
(Figure 2: Hash rate & mining difficulty, Mempool)
By combining the past few halvings with the development of mining and the ecology of the Bitcoin network, Bitcoin has formed a closed-loop value.Bitcoin is halved, BTC price rises, miners’ competition is escalating, mining technology and hardware demand increases, hash rate increases, Bitcoin network difficulty increases, miners’ costs increase, block production efficiency increases, and Bitcoin network value increases.During the entire process, good coins drive out bad coins, efficient miners replace less efficient miners, and the Bitcoin network ecosystem develops.
The essence of the halving mechanism is to encourage miners to maintain the long-term value of the Bitcoin network and the overall security of the network.On the one hand, Bitcoin’s halving mechanism can supply control inflation and achieve the value store of its tokens through scarcity enhancement; on the other hand, mining rewards are reduced, and miners rely more on transaction fees as a source of income, thereby promotingThe activity and efficiency of the entire network transactions and ensure the security and attack resistance of the network, thereby enhancing the value of the Bitcoin network.
thinkTest: The truth about the “halving market”?
In the information we receive, the hidden “necessary conditions” are subtly ignored.
Combining the nature of Bitcoin’s halving, halving drives the market, the necessary condition that most people are prone to ignore is consensus.This is an explanation that conforms to the attributes of monetary matters. Consensus determines the scope of circulation, and the increase in circulation and the price also increases.
(Figure 3: Bitcoin halving timeline, Coin Metrics)
The more people agree with the value of Bitcoin, the more users, the more people participate in circulation, the more liquidity increases, and the price trend increases. This is the normal market logic. The price and consensus of Bitcoin should be related to positive indexes..Looking at the past Bitcoin price trends, behind the several times that do not meet the horizontal parabolic trend, there are all external factors that have impacted on the Bitcoin market.
2013: Mt.Gox has experienced a lot of suspicious transactions, and two robot accounts Markus and Wiley have executed large-scale Bitcoin purchase orders, and the prices have risen sharply.
2017: From October 1 to December 16, 2017, the price of Bitcoin rose from $4403.74 to a high of $19497.4. During this period, USDT issued 28 additional issuances, with a total of 705 million additional issuances
2024: On March 12, the net inflow of Bitcoin ETF exceeded US$1 billion, and then the price of Bitcoin exceeded US$73,000, a record high.
Bitcoin’s status is shaken?
Analysts at JPMorgan once said: Ethereum will surpass Bitcoin in 2024.He believes that the Cancun upgrade will enhance Ethereum’s competitiveness. At the same time, favorable factors such as Bitcoin halving and ETF have already affected the price of Bitcoin, and their potential is insufficient.
Many people believe that put aside the hedging attributes of Bitcoin, Ethereum’s smart contracts and DApps can create more growth opportunities.In addition, the rise of blockchain networks such as BNB and SOL has brought diverse financial products and services to the crypto world, which is undoubtedly more attractive to investors seeking diversified portfolios and higher potential returns.
In the past, Bitcoin was seen more as a means of store of value; now, the Bitcoin network is no longer limited to being a medium of currency trading, but has given new functions such as NFT and tokenization.
From the perspective of on-chain value, after Cancun upgrade, L2 has initially achieved results in Gas expenses, throughput, etc., but Ethereum’s Gas expense optimization situation is not obvious enough.Moreover, Ethereum developers need to consider the pressure impact of the increase in on-chain activities, and to achieve the final form of Rollup expansion, a lot of development is still needed.
In 2024, innovations in the Bitcoin network Ordinals and BRC-20 token standards mark a major breakthrough in Bitcoin.The Ordinals protocol allows recording of arbitrary data on the Bitcoin blockchain, deploying, minting and transferring alternative tokens on the chain, creating digital artworks or NFTs.For the Bitcoin ecosystem, this is undoubtedly a breakthrough from 0 to 1, making DeFi possible in the Bitcoin network.
Judging from the price performance, the Cancun upgrade and Ethereum ETF will become its new narrative for breaking through its highs.Who would have thought that Cheng Yaojin had emerged halfway, Meme’s phased fanaticism made market funds rush to the SOL ecosystem, and the delay in the Ethereum ETF resolution also aggravated the market’s negative sentiment.As of April 19, Ethereum’s price retracement exceeded 24% from its highest point before the upgrade.
In contrast, Bitcoin’s price reached a record $73,798 in mid-March, accounting for nearly 55% of the market capitalization share of the cryptocurrency market, the highest level since April 2021.
(Figure 4: Cryptocurrency Price & Ratio, CMC)
In addition, Bitcoin is the product of Satoshi Nakamoto’s reflection on the 2008 financial crisis. He hopes to build an orderly, fair, and public interest-oriented decentralized financial system to cope with the limitations and crises of the traditional financial system.And now, the situation of “the Chancellor of the Exchequer is on the verge of the second round of bailout of the banking industry” is taking place.Monetary systems such as the Japanese yen, Indian shield, and South Korean won are facing severe tests under the pressure of strong US dollar index and short selling of international capital, with the Japanese yen exchange rate falling to a low level in 34 years.The United States itself will also face the choice of cutting off its arm, the credit of the dollar system collapses, the currency is weakened, and the US dollar is no longer the “US dollar”.
Investors need to focus on negative situations when the market experiences widespread liquidity tightening.
Asset monetization pressure: Liquidity follows means that credit difficulty increases and default risk increases. Liquidity reserves need to be increased by realizing assets, which may lead to Bitcoin being sold.
Market panic pressure: liquidity tightening will be accompanied by economic uncertainty and market panic increase, and investors will tend toward relatively conservative investment strategies.
Market depth hidden dangers: Liquidity itself is extremely important for market operations. When liquidity shrinks, the market’s ability to absorb large-value transactions will decline, that is, the market depth will decline, and small-value transactions may cause large fluctuations in prices.
PayPal co-founder Peter Thiel once said in public: “The central bank has gone bankrupt and we are at the end of the fiat currency system. Bitcoin is the ultimate alternative to the entire traditional financial system.”At present, Bitcoin’s market capitalization ranks 10th in the global asset ranking, and its huge consensus foundation and its importance in the financial market are self-evident.
(Figure 5: Comparison of Bitcoin with gold, silver and Tesla’s market value, 8marketcap)
What ETF pulls down the hind legs in half
In recent years, the connection between the crypto world and traditional financial markets has become increasingly close. For example, Bitcoin ETFs have been approved. Financial institutions such as Grayscale and BlackRock have provided innovative investments for traditional financial market investors by holding Bitcoin.product.
JMP Securities, a well-known Wall Street investment institution, once released a research report saying that spot ETFs tracking Bitcoin (BTC) are expected to have as much as $220 billion inflows in the next three years.They believe that capital flows will continue to grow significantly, and regulatory approval is only the beginning of a “longer capital allocation process.”
So far in 2024, Bitcoin ETFs have accumulated assets of up to about US$56 billion.
But the situation has changed recently, with Bitcoin ETFs having net outflows for five consecutive days, with a total outflow of more than US$319 million.
Inflation has not been controlled yet, Treasury bonds have become risky assets, and investors’ confidence in the market has been greatly affected.The price of Bitcoin also fluctuated significantly, falling by more than $10,000 from its historical high not long ago.I have to sigh that the ups and downs are all due to ETFs.
(Figure 6: Recent Price of Bitcoin, Investing)
The emergence of Bitcoin ETFs has changed the market dynamics.Bitcoin ETFs allow investors to indirectly invest in Bitcoin through traditional investment channels, and investors need to pay more attention when considering the impact of halving.
1. Bitcoin ETFs increase liquidity, attract a large number of institutional investors and funds, and will have an impact on Bitcoin price before and after the halving.
2. Bitcoin ETFs have increased demand for Bitcoin and reduced supply in circulation, which can easily affect investors’ accurate judgment of market expectations for the halving cycle.Investors need to distinguish between expectations of halving and actual situation after halving.Affected by Bitcoin ETFs, the market may have reflected expectations before the halving, resulting in price adjustments after the halving.
3. The behavior of long-term holders during the halving period has a significant impact on the market supply and demand balance.If long-term holders choose to sell Bitcoin after halving, it will increase supply in the market, thus putting pressure on prices.The flow of funds of ETFs may affect the decisions of long-term holders, thereby further affecting the market’s supply and demand balance.
The giant whale takes the helm, and it turns into a reshuffle?
According to Glassnode’s report, there are currently about 2.317 million Bitcoins with liquidity, accounting for only 11.7% of the current total circulation.The entry of traditional financial institutions has undoubtedly accelerated the pace of the Bitcoin market becoming institutionally dominated.
Institutional entry brings stricter investment processes and risk management measures to the Bitcoin market, which will improve the liquidity and depth of the market and catalyze the development of the crypto market to mature.Moreover, with the participation of institutional investors, more perfect requirements will inevitably be put forward for the regulatory framework to protect the interests of investors, reduce the speculativeness of the market, and further promote the healthy development of the market.
In addition, due diligence and compliance operations of institutional investors help improve market transparency and efficiency.As more regulated financial activity enters the cryptocurrency market, the irrational boom and bubble risk in the Bitcoin market will decrease.How to cooperate between regulators, market participants and financial institutions is key.
For ordinary investors, the institutionalization of the Bitcoin market is like a filter.On the one hand, the entry of traditional financial institutions will bring about a more stable market environment and more investment products.On the other hand, the entry of traditional institutions means more of an intensified competition and an increase in investment thresholds.
Especially when facing a halving cycle, there is a possibility of short-term fluctuations in Bitcoin prices, and institutions may use fluctuations to execute short-term trading or make profits through strategies such as selling high and buying low.Ordinary investors need to evaluate their investment strategies more carefully and seek professional financial advice, otherwise they will only be eliminated.
To individual investors
In the investment market, everyone has a 50% chance of turning around.
Insights into historical data, macroeconomics, market dynamics and other factors will help you increase your chances of winning.
But it is more important to remember that the impact of wrong investment perspective and mentality on the probability of winning is reduced exponentially.
To reap wealth, you first need to understand wealth and then learn to forget wealth.
