The expectation of the "halving market" first comes from an economic basis. In microeconomics, based on the assumption of rational people, it is believed that market supply and demand are the direct factors that determine market prices, and that market prices are positively correlated with demand and negatively correlated with supply. When demand is constant, a decrease in supply causes prices to increase, and an increase in supply causes prices to decrease. Bitcoin’s “reward halving” intuitively leads to a reduction in supply, thus creating an expectation of a price increase. In fact, in the more than ten years of Bitcoin's history, the performance of the market seems to be able to confirm the fact of the "halving market", and it can also conform to the basic economic theory of supply and demand.

However, if you think about this problem further, the premise of decreasing supply and rising price is that when demand remains unchanged, where does the demand for Bitcoin come from?

From the perspective of traditional commodity trading, many professional analysts will analyze the upstream and downstream conditions of the entire supply chain to judge the trend of commodity prices. For example, copper, rebar, soybean, cotton, etc., can all be traced. This type of analysis is generally called fundamental analysis, which is the most common and basic analysis method in traditional finance. But this method starts to fail when applied to Bitcoin. The reason is very simple. Like precious metal steel and agricultural products, people can easily find the scene of their demand, and there is still no clear statement on where the actual demand scene of Bitcoin is.

One of the most common demand statements about Bitcoin is its use as a safe-haven asset. Bitcoins are scarce in quantity, can be transferred point-to-point and cannot be tampered with, and the cost of electricity consumed is extremely high, which are all its important features. When Venezuela, Argentina and other countries experienced economic crises before, Bitcoin once became the safe-haven asset of these countries. However, the Venezuelan people choose Bitcoin because of the extreme conditions of the government’s credit collapse, which are rare in the normal environment.

Previously, during the spread of the new coronavirus epidemic in China, the price of bitcoin rose rapidly, and the market has interpreted that the epidemic has stimulated bitcoin’s hedging properties. Since then, the epidemic in China has been controlled to a certain extent, and when the global epidemic began to spread gradually, the price of bitcoin began to fall again, so the market believes that the epidemic has dragged down the price of bitcoin.

I have to say, this is a very funny scene.

In fact, Bitcoin does have hedging attributes from its core characteristics, but its hedging attributes have not yet produced the Pavlov effect in the market, which has become an inevitable logical relationship. This is like a beautiful girl who will be chased by many people in theory, and it will be easier to get married, but the reality is that many beautiful girls have become leftover women. There is still a long way to go before the hedging properties of Bitcoin can form a conditioned reflex in the market.

Of course, some people will say that during the previous conflict between Iran and the United States, the safe-haven nature of Bitcoin was very clear, and with the speech of US President Trump at the time, Iran did not hurt Americans. The incident will not expand its impact. After that, Bitcoin also fell, which shows that Bitcoin's safe-haven attribute is still sensitive to market news. This situation was indeed the case at the time, but from the perspective of the big market performance, the overall sensitivity of Bitcoin's hedging is far from that of gold, and it has not yet constituted the Pavlov effect. Therefore, the demand for Bitcoin's hedging is not stable. stop.

So what is the source of demand for Bitcoin? To get the answer to this question, you need to restore the real scene situation.

Ten years ago, geeks saw something technically cool like Bitcoin by chance and started to try to mine with their own computers. At this time, the demand for Bitcoin was out of hobby. But when Bitcoin buys pizza, with the original price, it can be converted into value with the real world, so some people start to try to use it for payment on the dark web, but as a payment tool, it needs to keep the value stable, and the price fluctuation of Bitcoin does not actually Not suitable for high-frequency payment tools. During this period of time, Bitcoin is still a dispensable thing in the real world, and the scene of its demand is not prominent.

Until the emergence of mining machines and related industries.

Previously, the Bitcoin mining machine was a CPU, and later evolved into a GPU until the professional mining machine appeared in 2013. This is for the real real industry that Bitcoin has spawned. The price of Bitcoin has risen rapidly, and people can obtain Bitcoin through professional mining. The process is similar to that of printing money with electricity, so professional miners have begun to appear. After miners deploy their mining machines on a large scale, large mining farms and mining pools appear.

To make money, miners need to boost the price of Bitcoin on the one hand, and hold more Bitcoin on the other hand. From this perspective, the people with the most direct demand for Bitcoin are actually miners.

In addition, as the sellers of mining machines, if the mining machine dealers want to sell the mining machines, they need the Bitcoin price to continue to rise, at least to let the miners see that the startup is profitable, so the sellers of the mining machines also need to find a way to boost the price. Bitcoin price. More representative, such as Bitmain, because the previous holding of a large number of digital currencies increased the difficulty of auditing, it has been difficult to list.

Following this logic, we can have an interpretation of the reason why the so-called "halving market" occurred because the price of Bitcoin would skyrocket after the previous halving.

When the reward is halved, the miner's income is also halved accordingly, and in order to be able to recover the cost and make a profit, the mining industry must boost the price and protect its own income. The so-called way of boosting can be to buy it yourself, or it can be to buy more mining machines to mine harder, telling the world that Bitcoin is really popular.

From this perspective, it seems that Bitcoin is more like a tool for mining to perform for revenue? of course not.

It is true that although the initial stage of the mining chain formed around Bitcoin is that the mining industry sells itself and makes a profit while raising the price of Bitcoin, but with the continuous increase of the price of Bitcoin, the whole pattern has undergone tremendous changes after the growth of the entire industry.

Simply put, when the industry around Bitcoin continues to grow and more people know about Bitcoin and start trying to join it, the consensus on Bitcoin grows.

Supply and demand reflect prices in the market, and the origin of real value is the consensus of people. Fiat currency represents national credit, but after the collapse of credit, people's consensus is lost, and people start to search for alternatives spontaneously, and the value of legal currency is annihilated. The safe-haven attribute of gold is also not because of its real industrial value, but because of people's consensus on its safe-haven value.

After the consensus is large enough, the value of Bitcoin can truly be established, and it will satisfy the Pavlov effect we mentioned earlier, and it will be more sensitive to the market's risk aversion.

That is to say, the kind of decentralized currency that Satoshi Nakamoto conceived at the beginning is really widely recognized by the world and is the result of the continuous efforts of the surrounding industries. Maybe their original intention is not so lofty, but they really created a miracle belonging to this era.

Will the "halving market" come?

After revealing the basis of the previous "halving market", we can draw the conclusion that the so-called halving market is because the group headed by the Bitcoin mining industry consciously raised the price of Bitcoin in order to increase profits, while It is not a market reaction caused by changes in supply and demand. Will this halving still replicate the historical market?

The previous news of Canaan’s listing has made the mining industry more recognized by the world. During this process, Bakkt’s futures and Chicago Exchange’s options have been launched one after another, which means that traditional funds will begin to enter the Bitcoin trading market on a large scale. That should theoretically help Bitcoin’s price boost, right?

In fact, this year's halving may be difficult for an explosive bull market.

First of all, we can look at the picture below. The price of bitcoin rose by a very high rate in the initial stage of bitcoin production. At this time, holding bitcoin is the most profitable time.

However, as the market value of Bitcoin becomes larger and larger, its rise begins to gradually slope, and it is no longer as high as the previous historical market.

The reason why this happens is actually because Bitcoin has a certain entropy increase effect in the process of consensus expansion and market value increase. To put it simply, it is relatively easy to push the price of Bitcoin from 1 to 10, while pushing from 10 to 100 requires more than ten times the capital, and pushing from 1,000 to 10,000 will increase the number of people involved in the transaction. The amount of capital required is higher. Therefore, it appears that the rise will gradually weaken in the continuous halving market.

The need for a larger entry capital is an important factor. Some people will say that since last year, many traditional capital funds have begun to enter the Bitcoin trading market, so the funds are very abundant. But on the contrary, the intervention of traditional funds has also become a resistance to Bitcoin's continued surge.

It is indeed a fact that traditional capital funds have begun to enter the market, but although the volume of traditional capital funds is large, the way to enter the market is not to buy bitcoin spot, but to allocate assets with various financial instruments such as spot, futures, and options. The reason why traditional funds do this is because a single instrument cannot meet its goal of making steady profits.

When traditional capital enters any market, it is used in conjunction with a variety of financial instruments, and the interlacing of various financial instruments will make the market more balanced, and it will be difficult for continuous surges and slumps to occur. Looking back at the end of the Bitcoin bull market in 2017, it started with the launch of futures on the Chicago Exchange. When market funds cannot continue to support the rise, they will turn their heads and fall. In the process of falling, the use of futures contracts can be used to short arbitrage, and the short futures market will exacerbate the degree of decline in the spot market.

In the previous halving market, the Bitcoin trading market has not yet produced such a large-scale derivative application. When the background becomes more and more complicated, it can be known from a dialectical look at the historical market that the arrival of this "halving market" will not be so smooth.

In addition, we use the Fisher formula to deduce the logic of Bitcoin's rise. According to the relationship described by the Fisher equation MV=PT, the transaction currency volume multiplied by the circulation velocity is equal to the weighted average number of commodities multiplied by the transaction volume, then M=PT/V, and the bitcoin transaction currency volume is regarded as M as the total market value, then It can be known that when V, that is, the lower the circulation velocity, the higher the price.

This model tells us a relatively simple and rude truth. When there are fewer bitcoins circulating in the current market, the more people are hoarding coins, and then the price of bitcoins will increase systematically. So are there many people holding coins now? Direct data is not yet available, but according to the latest data on February 20, the total number of Bitcoin addresses was 615,463,205. There are currently 28,728,292 addresses with balances above zero. Of these 28 million addresses, only 788,101 addresses have at least 1 bitcoin balance. There are 154,689 wallet addresses with a balance of 10 or more bitcoins. There are only 16,247 wallets with a balance of 100 BTC or more.

Although this set of data allows us to see an increase in the number of wallets, most wallets have very few bitcoins. This data tells us that most bitcoins are in the hands of a few people, and there are very few people who can really hold coins. Therefore, from the perspective of the proportion of wallet addresses alone, Tunbi is not optimistic.

What signals should we pay attention to in the "halving market"?

Although the above content shows that the explosive bull market of Bitcoin's "halving market" is not optimistic, but slow bulls can still be expected, why?

Let's start with mining. We have already described the importance of mining to Bitcoin price support. Then this year's halving market will have a very serious problem, that is, after Bitcoin halving, many mining machines will face the danger of being eliminated. Miners also need to quickly iterate the mining machines. During the process of elimination and iteration, the computing power will fluctuate greatly, and the price of Bitcoin may also fluctuate during this period.

And the leading mining machine manufacturers have launched a new generation of more powerful mining machines to deal with it, so go back to the original logic. In the future, no matter how the rise of Bitcoin encounters the interference of traditional capital using financial tools, the general direction will definitely rise. of. All it affects is the magnitude of the post-halving Bitcoin reward rise.

Therefore, people can participate in Bitcoin investment, or buy mining machines to participate in the mining industry, if they follow the same thinking, they can participate in Bitcoin investment in the most stable manner.

Second, another important condition mentioned just now is the issue of stockpiling coins. Bitcoin contracts have a relatively natural advantage, that is, they do not require rigid delivery, so the impact of the contract market on the currency can be ignored for the time being. It is more realistic that the income of small miners will decrease after the output is halved, because the basic survival needs will sell coins. This is the case in most cases. To solve such a problem, the business that requires bitcoin mortgage lending is more mature.

In fact, DeFi-related business has developed very well this year, but the concept of DeFi is still too avant-garde. For the business of mortgage lending, non-decentralized exchanges can do it, and it is more straightforward for miners. Then, if the business of staking coin lending can be improved this year, it is foreseeable that the number of people who hold coin will begin to increase. Such a perspective is more intuitive than looking at bitcoin wallet addresses, because many people can also put their coins on exchanges and participate in some financial management projects.


Bitcoin's "halving market" may come in another unexpected gesture, but there are many gestures to welcome it.

Mining will be an industry to focus on this year, and there are many ways to get involved. This is something unimaginable in the age of traditional finance, because you can't carry a money printing machine into your home. Similarly, when investors accumulate coins, they can use the means of borrowing.

To answer our initial question, the Bitcoin “halving market” will not repeat itself.

The entire industry is creating new history.

Responsible editor; zl

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