In the early hours of May 12, 2020, Bitcoin officially completed its third historic halving. Looking back at the past history, it is not difficult to find that Bitcoin has maintained a similar price trend after halving, so we judge that the third halving of Bitcoin will continue and truly establish its periodicity of halving trend.
Based on the third important stop point in the development process of Bitcoin, Hufu Blockchain Research Institute predicts the impact of this halving on the market price of Bitcoin through a correlation analysis of the historical trend of halving the past. At the same time, through multi-dimensional proofing reasoning, it proves that Bitcoin has halved its bullish conclusion for the third time.
The logic of this article:
1. Summary of past history of Bitcoin halving
2. Trend correlation analysis of Bitcoin halving
3. The bullish logic of Bitcoin’s third halving
“History will not repeat the details, but the process will repeat similarly.”-Mark Twain
1. Summary of past history of Bitcoin halving
On January 3, 2009, Helsinki , Finland , Satoshi Nakamoto dug the first block on a small server here , and he received 50 bitcoin rewards . This block is called the ” God District” Block ” .
In the design ideas Nakamoto’s economic model Bitcoin persistent deflation, which specifies each mined out of 210,000 blocks , bitcoin reward will be reduced by half , that is, four years is a halved period.
(Halving algorithm code validation.cpp line 1138 v0.16 )
To prove with the results, the initial setting of this economic model of Bitcoin has achieved remarkable results in being popularized and adopted . The halving mechanism has shaped its relatively stable economic revenue model , and the expected revenue experience is more likely to attract miners to participate and promote the ecology.
So we see that in recent years, the concept of Bitcoin halving has become more and more known. But at the same time, when most people are advocating that the currency price will rise after the halving, more people always remain skeptical, watching and not participating.
The reason for this is actually because many watchers question the so-called belief of Bitcoin, and because the Crypto currency market is much higher than the uncertainty and risk of the traditional financial market, they feel afraid and dazed.
Today, we are standing at the third important stopping point in the development process of Bitcoin. When you look back at the past history, you may be able to find the price law of Bitcoin, which is actually starting with its “halving” as the time node. Gradually evolved its trend periodicity.
On November 28, 2012, Bitcoin was officially halved for the first time, and the block reward was reduced from 50 BTC to 25 BTC . Bitcoin had just experienced its first round of bull and bear conversion since its birth.
In the earliest days, the rise of Bitcoin was mainly driven by Bitcoin users and long-term investors who understood the technology and shared a common vision with the founders.
But then, as ordinary investors began to flock in, this still small market could not provide sufficient liquidity to undertake huge increments. As a result, the price of bitcoin began to soar, soaring from 6 cents to a high of 36 dollars. And followed by Bitcoin’s plunge of 93%, opponents began to appear and talked about “a failed experiment”, advocating “Bitcoin’s demise”.
In this context, the first halving of Bitcoin is expected to form a consensus on rising. By the time Bitcoin is officially halved on November 28, 2012, BTC has risen 341.9% from the bottom of the plunge. At this stage, the average transaction price of BTC is only 12.31 US dollars.
At the same time, we can find through statistics that the price of BTC in the week before the first halving fell by 63% from the previous peak and increased by 485% from the last low.
After the real halving, the total daily output of Bitcoin dropped from 7200 BTC at the time to 3600 BTC per day . This fact prompted the average price of Bitcoin from US $ 12.31 to skyrocket by nearly 8000% from 2013 to 2014, and successfully broke the thousand by the end of 13 years.
The second halving time of Bitcoin is July 9, 2016. After this halving, the block reward of Bitcoin will be reduced from 25 BTC to 12.5 BTC . It should be noted here that the time between the second halving and the first halving is only 1316 days, or 3.6 years.
In less than 4 years, Bitcoin also experienced a long round of bull and bear conversion after reaching its peak. Compared with the week before the second halving, BTC was 45% below the peak and 300% higher than the bottom. The same after the second official halving was completed, Bitcoin ushered in its new round of rising cycle, this time violently pulled up from around 500 US dollars, rushing to nearly 20,000 US dollars.
At this point, the Bitcoin faith began to return, and even attracted more external investors and investment institutions to enter the Crypto currency trading market. Ethereum and grapefruit were born, various lCOs did not emerge, and new concepts such as platform coins also continuously stimulated market activities and mobilized investor enthusiasm.
So we see that the Crypto currency secondary trading market is constantly improving and building its own rules and industrial logic. The mining circle, coin circle and chain circle began to connect in series, forming a mutually stable and stable global ecological industry chain.
2. Trend correlation analysis of Bitcoin halving
1. Correlation analysis of historical trends
( History of BTC )
On May 12, 2020, Bitcoin will usher in its third capacity halving in history. After this halving, Bitcoin’s reward per block will be reduced from 12.5 BTC to 6.25 BTC . And when you sink your heart to carefully examine its price movement before halving, you will be amazed by how strikingly similar history is.
Every halving of Bitcoin will usher in a new historic high. Since the second successful halving, the highest point of Bitcoin has reached 19,821 US dollars, and the bottom of the subsequent adjustment has reached 3155.2 US dollars.
Now, the third halving of Bitcoin has been officially completed. By comparing the average value of Bitcoin’s market price one week before the halving with the stage high and stage low, it can be concluded that the BTC halving is lower The peak is 56%, an increase of 177% from the bottom.
Combining the data of the previous two halvings, we can initially analyze the correlation of the halving trend of Bitcoin. Below is a comparison of the two sets of data to show the conjecture of its regularity:
As shown in Table 1, the average price of the week before the halving was compared with the previous peak, and the average value of the decline range fluctuated around 50%, and the amplitude showed a convergence trend.
As can be seen from Table 2, the average price of the week before the halving was compared with the previous bottom, and the increase of Bitcoin from the bottom showed a gradual decrease trend. Compared with the previous one, the two reduction rates remained basically stable at around 40% , The average of both is 39.5%.
This shows that the historical price trend before Bitcoin halved showed a certain trend correlation. On this basis, we can infer how bitcoin will evolve after the third halving by comparing the historical price trend of Bitcoin after the previous two official halvings.
2. Trend forecast after the third halving
(Bitcoin price growth after the first and second halving)
After the first and second halving of Bitcoin, there was a round of bull market closely following. From the time period, the first round of halving the bull market lasted for one year, and Bitcoin rose 9378% at this stage ; and bit The duration of the bull market after the second halving of the currency is about 18 months (1.5 years), and the increase at this stage is 2872%.
Taking the relevant data of two halvings for comparison, the following table can be initially established:
The table is calculated using the simplest linear relationship ratio. The bullish stage after the third halving is expected to increase by about 879.54%, and the actual average price of 8631.5 dollars in the week before Bitcoin ’s third halving is calculated. The peak value after the third halving should be around 75917.4951 US dollars, and the duration of this halving bull market is about 2.25 years.
From this, we can also draw a conclusion: Bitcoin’s increase after halving is gradually decreasing, and it takes longer and longer from the start to the real peak.
Here, the reduction in bull market growth can be explained by the increasing value of Bitcoin, and it can also be understood as a decline in marginal utility; the extension of the bull market duration is mainly due to the competition between miners and other large currency holders and the increase in market traffic (The article will discuss this in detail at the end).
The core idea embodied in this model is very simple, that is, “things are rare”. This is represented by the relationship between supply and demand in economics. According to its principle, we can also simply predict the price fluctuation law of Bitcoin.
3. The bullish logic of Bitcoin’s third halving
The halving of the Bitcoin block reward means that the supply will be reduced by 50% in an instant . If the theoretical demand remains unchanged, its price will continue to rise. Of course, this is an ideal situation. If you want to predict the evolution trend of Bitcoin after halving, The issues that actually need to be considered are quite complex.
1. Bitcoin long miners present a competitive advantage
First of all, the reduction in bitcoin capacity will directly affect the mining revenue of miners. Many small mines are actually unable to withstand the impact of profit cuts. When the mine becomes unprofitable, the miners often choose to close Or sell equipment exclusively to reduce its cost. In this case, the computing power will drop significantly, and the block time will become slower and slower, which affects the efficiency of the Bitcoin system. The worst result of this impact is that the entire system crashes and the currency price returns to zero.
Of course, this is a very small probability. Due to the predictable nature of Bitcoin’s earnings, most miners prepare solutions in various situations before halving, so that the market’s reaction to Bitcoin’s halving eventually tends to be moderate.
We can divide miners into two categories: bull miners and bear miners.
For those bitcoin miners who continue to see multi-currency prices, the halving of production capacity will bring a relatively positive impact on the market, and the reduction in supply will contribute to the continued rise in bitcoin prices. Under this expectation, miners often choose to retain or update their equipment to improve their computing power. Although they have huge bitcoin reserves, the biggest possibility is that they choose to hold the currency up.
The miners in the bearish market are usually prepared in advance, such as selling mining equipment before Bitcoin is officially halved, and selling Bitcoin in the secondary market at an appropriate price in advance. This part of the miners’ bitcoin reserves will gradually decrease. When the halving is completed, their reserves tend to be lower than those of the bulls.
So it can be judged that after halving in the miner circle, more bitcoin will be concentrated in the hands of the miners who look at the market. For them, it is almost impossible for them to concentrate dumping bitcoin after the halving. In analogy to the traditional financial market field, the market maker is more about “absorbing funds” than “shipping”.
Then the best strategy that miners can adopt can be inferred that they will hold the currency up and reduce the secondary market selling pressure by concentrating chips. At the appropriate time, they may follow the external inflow of funds to draw up, creating a strong situation for multiple parties.
In this way, we can attract more external funds to enter the market, and support large miners, bitcoin whales and other large currency holders to cash out one after another. So as far as the current time node of halving is concerned, the profit of selling is far less than the gain of holding currency.
2. The market will actively maintain the effectiveness of the S2F model
Plan B in the S2F model (that is, the stock / production model) predicts that Bitcoin’s price will reach between 10,000 and 100,000 US dollars after halving in 2020. The high point predicted by the linear ratio in this article is 76,000 US dollars, which basically meets the model prediction
The Bitcoin S2F model is shown in the figure above. The “black line” in the figure is the S2F model curve, and the “red line” indicates the actual price of Bitcoin. According to the comparison of historical prices in the past, it can be seen that Bitcoin has basically kept moving within the trajectory of the S2F model. A few high points indicate that Bitcoin is overvalued.
Under the S2F model, if Bitcoin starts trading sideways or out of a callback after the third halving in 2020, the entire model will be overthrown and rebuilt.
Now that Bitcoin has experienced the first and second halving, it has come out of an approximate trend cycle, but for many people this may not be convincing enough. They also need a third, or even a fourth, similarity cycle to determine their long-term effective trend cycle.
This is true for retail investors, as well as institutions and large investors. The “rising consensus” of the market is difficult to construct based on the verbal “bitcoin belief”. Only by actively maintaining the validity of the S2F model and providing the market with a reasonable technical theoretical basis can we increase the investor’s collective confidence and use the vast majority The profit-seeking psychology of the participants and bystanders created a Bitcoin belief ecosystem in which concepts and directions are concentrated, which boosts the price of the currency.
3. High leverage and derivatives bubbles boost the price of coins
In traditional financial markets, the value of financial derivatives is based on a variety of basic assets such as exchange rates, interest rates, commodities, credits, and stocks. Its significance is mainly to reduce market economic risks and stabilize international trade exchange rates.
In the Crypto currency trading market, the value of Crypto asset derivatives against the target spot price is more significant in that it can provide effective risk hedging tools for professional investors in the market. The large number of derivatives has actually increased the high volatility of the market itself, and this part of the product also meets the risk investment preferences of some investors who want to pursue extreme arbitrage.
Changes in investor risk appetite and speculative demand will inevitably promote the development of the financial derivatives market. It is not difficult to find that today there are more and more types of financial derivatives, their markets are being subdivided, and the scale of transactions is also growing rapidly.
But at the same time, the development of Crypto currency derivatives has also brought certain risks to its spot trading market. Because financial derivatives are extremely speculative, their short-term investment income has greatly attracted a large number of risk appetites.
In the current Crypto currency futures contract market, bitcoin contracts held a total of more than 3 billion US dollars on the 7th, and the scale of external leveraged borrowing is also more than one billion US dollars, which means that the bubble in the Crypto currency market is intensifying. However, if this data is compared with the daily transaction volume of up to US $ 30 billion in Bitcoin spot on the whole network, its proportion is only about 10%.
This can lead to such a result: that the leverage ratio of the current Crypto currency derivatives market is still within a safe and controllable range, and the scale of Crypto currency derivative transactions still has some room for growth.
Then, with the continuous development of Crypto currency derivatives in the future, the scale of its leverage will be further expanded, thereby bringing considerable incremental funds to the entire Crypto currency market. Driven by the high leverage and derivative bubbles, the market price of Bitcoin as the market leader will definitely rise.
4. Traditional institutional investment funds began to shift to the mainstream of stock
In recent years, the entry of traditional Internet giants and financial investment institutions into the Crypto currency market has become a new trend.
2018, George • Soros ( George Soros ) and Rockefeller ( Rockefeller ) family will start positions in the emerging Crypto currency asset classes. The Soros family’s $ 26 billion fund management company is already trading in the Crypto asset field, and the Rockefeller family’s venture capital firm Venrock is collaborating with Coinfund to help entrepreneurs start blockchain businesses.
In the same year, Bakkt, a cryptocurrency exchange created by ICE, the parent company of the New York Stock Exchange, announced that it had received $ 183 million in financing from 12 investors, including Victoria Harbour Investment under Li Ka-shing, Naspers, the largest shareholder behind Tencent, and Microsoft. Venture capital M12, currency circle Goldman Sachs Galaxy Digital, Boston Consulting Group, etc.
On June 18, 2019, the software giant Microsoft announced that it joined the world’s largest distributed ledger project-the super ledger camp. On the same day, Facebook announced its progress in Crypto assets, and the Libra project white paper was officially launched, with the goal of solving the problem of inclusive financial payment on a global scale.
July 10, 2019, the world’s largest chat encryption software Telegram (telegram) for the first time token sales in Liquid Stock Exchange , it is worth noting that the sales of is organized by one of Asia’s largest private equity buyers Gram Asia , rather than Telegram official.
At that time the official told TON Network main network on-line time is October 31, 2019 , based on the main network while the issue of Gram tokens will unlock subsequent gradual.
But the reality is that after a long struggle with the US Securities and Exchange Commission, Telegram CEO Pavel Du Luofu (Pavel Durov) and finally in 5 Yue 12 Ri officially announced that the company will terminate Telegram open network (TON) and related Gram token.
In fact, traditional institutions have inevitably encountered resistance from the social economy, financial supervision, and policies in entering the Crypto asset field.
In Libra ’s white paper 1.0 published by Facebook, Libra ’s vision was to create a decentralized global payment system that provides transfer and payment functions for individuals in developing countries who do not have bank accounts. At the same time, Libra has established a monitoring mechanism for itself. The Libra Association (official operating agency) is composed of multiple different organizations, which makes the entire system more fair.
In the Libra white paper 2.0 released on April 16 this year , Libra made concessions due to regulatory pressure. Compared with the 1.0 version, the changes in 2.0 are mainly reflected in: in addition to anchoring a basket of fiat currencies, providing a stablecoin linked to a single fiat currency; increasing the security of the Libra payment system through a robust compliance framework; while maintaining its key economy At the same time, abandon the future transition to a permissionless system (public chain); establish strong protection measures for Libra’s currency reserves.
However, most people believe that even if Libra begins to show a succumbed posture under supervision, the political resistance it faces still exists, so the future of traditional institutional investors entering the Crypto currency market may need to fully consider compliance and regulatory issues .
Compared with spontaneous projects, traditional financial institutions and investors tend to invest more in the mainstream of the Crypto currency market. When people are talking about Bitcoin-related remarks made by hedge fund legend Paul Tudor Jones, many people start to find that institutions and financial professionals are more or less true bitcoin holders.
Paul believes that the covid-19 epidemic led to the unlimited issuance of the US dollar and led to large inflation, which prompted it to allocate 2% as a Bitcoin asset. For more institutional investors who are about to enter the Crypto currency market, bitcoin must also be their preferred asset after placement.
Therefore, in the foreseeable future, when the market investor structure shifts from individual investors to institutional investors, it will eventually evolve into a trend where traditional institutional funds begin to shift to the mainstream of stocks. At that time, the most representative and symbolic bitcoin in the Crypto currency field may become the biggest winner.
Viewpoints in this article:
History will not repeat the details, but the process will repeat similarly. Under the impact of the covid-19 epidemic in 2020, the shortage of centralized sovereign currencies began to highlight, and the unlimited flood of water that did not comply with economic rules will bring long-term negative effects on the economy. If the established economic model is among them, it will surely be highly respected and followed by the market.
Therefore, the trend of bitcoin halving after a long period of time is likely to continue in the long term, and the tortuous process depends on the market investors’ long and short games at the asset and psychological levels.
* Hoo Research strives but does not guarantee the accuracy of the relevant data and industry information in this article. This research report is for reference only and does not make any investment recommendations.