Original title: Bitcoin halvings may be bullish—but returns have shrunk every cycl
Original author: David Canellis
Original compilation: Mary Liu, BitpushNews
Bitcoin’s current rise comes amid a combination of two bullish narratives: The halving will cut new supply in half in less than eight weeks, while spot ETFs are already accumulating Bitcoin faster than they can be mined.
In addition to new demand for spot ETFs, the halving is often seen as a catalyst for a significant increase in Bitcoins price.
But over the past two cycles, it was cryptocurrencies, not Bitcoin, that benefited the most. From the year before each previous halving, Bitcoin’s peak rally was:
· 50,000% growth one year after 2012 halving.
· An increase of 8,500% in nearly a year and a half after the 2016 halving.
· 1,000% one and a half years after the 2020 halving.
An interesting finding for the mathematically minded is that Bitcoin’s post-halving increase is approximately the previous period’s number divided by 6 to 8 (50,000% / 8, 500% ; 8, 500% / 1,000%). If history repeats itself, Bitcoin’s peak gain this time will be less than 170% — and it has already achieved most of its gains.
All of this is understandable considering Bitcoin’s market capitalization has exceeded $1 trillion. There is no way the price of Bitcoin will rise 500-fold in two years like it did in 2012, when its market capitalization was less than $200 million.
Bitcoin (BTC) currently accounts for about half of the entire cryptocurrency market, but there are tens of thousands of other cryptocurrencies, and overall, they tend to ride the coattails of Bitcoin’s biggest rallies.
In fact, tokens other than Bitcoin have always stood to gain more from the Bitcoin bull run. The year before the 2016 halving, the total value of cryptocurrencies excluding Bitcoin was $64.9 million.
A year after the halving event, at the height of the 2017-2018 bull market, that number had grown more than 6,000 times to $421 billion, largely due to the rise of XRP, Ethereum, and Bitcoin Cash .
Likewise, in the last cycle of cryptocurrencies (2019-2021), cryptocurrencies other than Bitcoin were valued at $71.6 billion the year before the 2020 halving.
A year and a half later, when Bitcoin was near its all-time high, all other cryptocurrencies were worth $1.7 trillion — a growth of more than 2,000%, outpacing Bitcoins 1,000% growth rate.
The four-year cycle is not unique to Bitcoin
This article once again emphasizes that the sample size of three halvings is too small to draw any meaningful analysis.
Such a small sample size means factors other than the halving may also play a role in shaping Bitcoins seemingly regular four-year market cycle.
The global liquidity cycle, which tracks the amount of cash flowing in the global economy, may be more closely correlated with Bitcoins rise than the halving.
It turns out that global liquidity also operates on a four-year cycle.
As with the halving, proving that a wave of global liquidity caused Bitcoins explosive growth is actually still unscientific. Its likely a mixed effect of the two: as global liquidity deepens, supply decreases, spilling over into speculative assets like cryptocurrencies. category, thereby driving up demand.
Excluding one day of net outflows from spot ETFs last week, U.S. physically-backed Bitcoin funds purchased an average of nearly 6,350 Bitcoins ($362 million) per trading day.
Bitcoin miners mine an average of 147 blocks per day and are rewarded with 6.25 BTC ($356,600) for each block, which is how the network distributes new coins.
As a result, miners are extracting less than 920 Bitcoins ($52.5 million) from the blockchain every day. Bitcoin funds led by BlackRock, Fidelity and Ark/21 Shares purchased nearly six times as much money on behalf of shareholders.
Many aspects of the Bitcoin market exceed the supply of Bitcoin. An average of approximately 35,000 BTC ($2 billion) has flowed into cryptocurrency exchanges every day this year, indicating that potential Bitcoin sales are 37 times higher than the amount mined every day.
Even taking into account Bitcoins recent price rise, if only a fraction of the Bitcoin miners sending to exchanges end up being sold, then assuming there is enough supply to meet demand, the price will not immediately go parabolic.
Still, with the halving just around the corner – expected on April 19 or 20 – it’s easy to see how they’ve captured the imagination of the entire market. Crypto-native companies like Bitwise, Bitfinex, and CoinShares have tried to demystify them, as have financial institutions like JPMorgan Chase and Standard Chartered.
On a practical level, the Bitcoin halving will fundamentally change the economics of Bitcoin mining, and CoinShares expects that if Bitcoin doesn’t stay above $40,000 (so far, so good), several major Operators will be in trouble.
Standard Chartered has become known for its bold crypto price predictions in recent years, and at the same time, it still maintains its target of reaching $100,000 per cryptocurrency by the end of the year, in part due to the extent to which the halving may affect the price of cryptocurrencies. Supply and demand tilt toward the latter.
It’s easy to chart Bitcoin’s price action after previous halvings (there have only been three, in 2012, 2016, and 2020). After all, Bitcoin’s biggest bull run peaked between a year and a year and a half after the halving.
Besides proving that past performance is no guarantee of future results, its anyones guess as to why this time will be different.
Whatever impact the halving has (or has not) on the price, looking back at the data shows that despite massive capital injections every four years, the cyclical effect on the Bitcoin market is weakening over time.
