The Interaction Between Bitcoin Halving and Market Cycles

The impact of Bitcoin Halving on its price is not only due to the emotional fluctuations brought about by scarcity but more importantly, its effect on the cost structure. Halving essentially means a reduction in production, meaning that the same computational power can only produce half the amount of Bitcoin.

If the total network hash rate remains unchanged, then the mining cost of Bitcoin will significantly increase. Considering the miners' expectations and sunk cost factors, in reality, the total network hash rate is likely to further increase, driving up production costs. This explains why the peaks of Bitcoin bull markets usually occur more than a year after the Halving, rather than around the time of the Halving.

However, the halving effect alone is insufficient to fully explain the price trends of Bitcoin. Macroeconomic factors, particularly the monetary policy cycle in the United States, seem to be closely related to the bull and bear cycles of Bitcoin.

Observing the past few rounds of bull markets, we can find some interesting patterns:

1. There is usually a gap of about 12-18 months between Bitcoin Halving and price peaks.
2. After the M2 money supply growth rate in the United States reaches its peak, the price of Bitcoin reaches its high point within 9 to 22 months.
3. About 12 months after the U.S. presidential election, the price of Bitcoin reached a peak.

These patterns suggest that the design of Bitcoin may have taken into account U.S. policies and economic cycles. U.S. elections are often accompanied by relatively loose monetary policies, which provide a favorable environment for speculative markets.

Looking ahead, although the performance of Litecoin Halving in 2023 is not as good as in 2019, this should not overly affect our expectations for the next Bitcoin bull market. The key is to focus on macroeconomic indicators, especially the shift in the Federal Reserve's monetary policy.

Currently, the M2 money supply in the United States has shown negative growth for the first time, reflecting tight liquidity. The market anticipates that the Federal Reserve will begin to cut interest rates next year, but there may be a transition period between stopping rate hikes and starting rate cuts.

For investors, it is essential to remain patient at this stage. Although there may be opportunities with certain altcoins in the short term, long-term investments should still be approached with caution. The future bull market cycle may be delayed due to macroeconomic factors, and the specific timing needs further observation.

Overall, the price trend of Bitcoin is the result of multiple factors working together, including its intrinsic Halving mechanism, the global macroeconomic environment, and investor sentiment, among others. Understanding the interactions of these factors helps us better seize market opportunities.