Original title: "Less than a year away from Bitcoin halving, can cycle theory still be relied on?"
Original author: Zero Ika
Original translation: Luffy, Foresight News
Bitcoin halving is a topic of concern for many people in the cryptocurrency industry. Historically, it has often been a catalyst for a new bull market. This tweet is about my analysis of the Bitcoin cycle.
Bitcoin halving is a plan aimed at reducing the block rewards that miners receive. When Bitcoin was launched in 2009, miners could receive a reward of 50 BTC per block. After approximately four years, this reward is reduced by half.
2012 Halving: Each block rewards 25 BTC.
2016 Halving: Each block rewards 12.5 BTC.
2020 Halving: 6.25 BTC reward per block
2024 Halving: 3.12 BTC reward per block
The purpose of halving.
Due to the fact that Bitcoin was created in 2009 (after the global economic crisis of 2008), its goal was to become an alternative to fiat currency that is not affected by inflation. Therefore, halving is crucial for the currency protocol that aims to create deflationary currency.
People generally believe that Bitcoin experiences a bull market every four years and undergoes a halving every four years.
This is not entirely accurate. The specific time is not exactly 4 years, but depends on the block time. Halving occurs every 210,000 blocks.
From a historical perspective, the months following Bitcoin halving events have always been accompanied by bull markets. This is due to the supply and demand relationship - the scarcer an asset is, the more valuable it becomes as demand increases.
Therefore, the relationship between price and halving is determined by demand, which does not necessarily mean that prices will rise. Due to the halving of block rewards, even if the number of buyers remains the same, it will help to increase prices. This is how the law of supply and demand works.
Everyone tries to "predict" cycles, hoping to catch the top and bottom of Bitcoin to improve the returns of their investment portfolio.
However, "prediction" is often the most difficult, because many things may undermine our theoretical foundation:
Black Swan (Covid, war, etc.)
Unexpected events (FTX + LUNA crash, etc.)
Bai Tian'e (changes in monetary policy, etc.)
Therefore, having an open mindset is very important.
Regardless, the cycle is the "compass" that provides us with better navigation. If we compare the price history of Bitcoin with traditional finance that has existed for over 200 years, it is relatively new, but it is also the analysis data we need.
There are many indicators applied to Bitcoin charts, but what fascinates me the most is the 4-year cycle, from which we can discover some interesting correlations.
From the high point in 2014 to the high point in 2017: approximately 211 weekly candles and 1477 days.
From the end of 2015 to the end of 2018: approximately 205 weekly candles and 1435 days.
From the high point in 2017 to the high point in 2021: approximately 204 weekly candles, 1428 days.
From the end of 2018 to the end of 2022: approximately 205 weekly candles, 1435 days.
As you can see:
From one high point to the next, or from one bottom to the next, there are about 200 bars in a weekly chart. This is an interesting correlation that shows the periodicity of prices.
The most important question that everyone is concerned about has arrived:
Will Bitcoin reach a high point in 2025?
Correspondingly, will there be a bottom in 2026?
Please remember, this is just one aspect to consider in your overall plan, and the best approach is always to evaluate step by step.
But it's very charming, isn't it?
Another factor that needs to be considered is undoubtedly the impact of halving.
During the first halving, the circulation of Bitcoin was approximately 10.5 million coins, while now, the circulation has exceeded 19 million.
Therefore, the impact of the next halving may be reduced, as 90% of the total supply of Bitcoin has already been circulated.
With the popularization of public awareness and the increase of funds flowing into the market, the return on investment we can obtain will gradually decrease. This may be a natural evolution of new financial assets and industries:
More standardizedThe translation of the given Chinese text is: "More liquidity."
More are used
If the cryptocurrency market reaches the size of the securities market one day, what will happen? We can speculate that volatility will decrease.
If we compare the periodic return rate, we will find:
From 2012 to the peak in 2014, the reduction was 50%: 11,000%.
From 2016 halving to 2017 peak: 3685%
From 2020 halving to peak in 2022: 685%
As you can see, the rate of return has a clear downward trend, but it is still very impressive.
As mentioned earlier, when we decide when to buy/sell, we cannot rely solely on cycles. Past performance does not guarantee future performance. However, they can assist us in making decisions as one aspect of our considerations.
This industry is still very small and is easily influenced by speculative behavior. When most people believe in something, the impact of this behavior is often magnified. However, Bitcoin halving is not just talk, it is a technical feature explicitly stated in the protocol, and this is something that should always be remembered.