Emotions and logic of the halving

Many friends believe that the impact of "halving" on Bitcoin is scarcity, which has led people to hoard and speculate on BTC.

In fact, the so-called "halving" means that the output is halved. The entire network invests the same cost (computing power) in mining, but the output of BTC is halved.

If the total network computing power is reduced by half, the cost of BTC mining will remain unchanged. Due to expectations (expected BTC to rise) and sunk cost factors (mining machine costs are sunk costs, as long as mining output is higher than the liquidity cost, miners will continue to mine), the computing power of BTC is likely to be higher than halving.

Otherwise, as long as the computing power of BTC exceeds half, the mining cost of BTC, or the production cost, will increase. As more and more high-cost BTC are mined, the price of BTC is pushed to a higher point. Therefore, the peaks of several rounds of BTC bull market were not near the halving, but more than a year after the halving.

Therefore, the logic of "halving" driving the bull market is not only the situation, but also the cost factor. Of course, cost cannot determine the price, especially for "coins", it is too common for prices to fall below the cost.

LTC Halving

Some friends believe that the performance of LTC halving in 2023 will be far inferior to that in 2019, and this round of BTC halving may not perform well either.

In 2019, Litecoin’s halving occurred in August, while the price peaked in June. This is of course due to the impact of halving on sentiment.

But do you think this is a coincidence? In June 2019, the Federal Reserve began to cut interest rates!

Macro and the bull market

Many cryptocurrency enthusiasts scoff at the macro outlook because in the past there was indeed no high correlation between BTC and U.S. stocks.

But in reality, it’s possible that BTC has barely escaped the macro cycle.

it is known:

BTC had its first halving on November 28, 2012, and reached its peak about 12 months later (November 2013).

On July 9, 2016, BTC halved for the second time. About 17 months later (December 2017), BTC reached its peak.

On May 12, 2020, BTC halved for the third time, and about 18 months later (November 2021), BTC reached its peak.

Maybe we didn’t realize:

In January 2012, the US M2 growth rate reached its peak, and about 22 months later (November 2013), BTC reached its peak.

The US M2 growth rate reached its peak in October 2016, and BTC reached its peak about 14 months later (December 2017).

In February 2021, the US M2 growth rate reached its peak, and about 9 months later (November 2013), BTC reached its peak.

The most accurate one is (???):

The US election was held in November 2012, and BTC reached its peak about 12 months later (November 2013).

The US election was held in November 2016, and BTC reached its peak about 12 months later (November 20173).

The US election in November 2020, BTC reached its peak about 12 months later (November 2021).

Satoshi Nakamoto designed BTC to halve every 4 years, and if miners were not rushing to mine, the halving would occur approximately in January after each presidential election (when the president takes office). Satoshi Nakamoto's design definitely took into account the US policy and economic cycle!

As shown in the figure, most of the three recent US elections occurred when the M2 money supply growth rate was near a peak or small peak. As long as the M2 growth rate is greater than zero, it is flooding the market, and when the M2 growth rate is near the peak, it means that it is in the stage of accelerated flooding.

The release of money will lead to abundant US dollar liquidity in the market, and of course part of it will boost the speculative market.

After this analysis, the conclusion is very obvious.

BTC’s bull run every four years is driven by the “halving” and is also influenced by macro factors.

The key to the surge in $LTC after halving may not be halving, but macroeconomics. Therefore, if LTC does not perform well during the halving in 2023, there is no need to worry too much. There is no need to worry about whether there will be a bull market in 2025, or even too much worry about LTC.

The positive impact of BTC halving will still exist, the Federal Reserve will always cut interest rates, and US dollar liquidity will always move from a tight to a loose environment.

The Fed kept interest rates high for about 14 months from 2006 to 2007. The most pessimistic forecast is that interest rates will be cut by the end of next year, while the most optimistic forecast is that interest rates will be cut in the second quarter of next year.

Therefore, affected by macro factors, the bull market cycle should be pushed back again from the beginning of interest rate cuts to the peak of M2, rather than being pushed forward to the end of 2024 as originally thought, or even to 2026. It is difficult to predict the specifics now.