The Deep Impact of Bitcoin Halving Mechanism

The impact of Bitcoin Halving on the market is not just the psychological "scarcity" effect, but more so driven by economic principles of cost. The so-called "Halving" actually refers to the reduction of output by half, where the same computational power resources are invested across the network, but the number of Bitcoins produced is halved.

If the total network hash rate remains unchanged, the mining cost of Bitcoin will significantly increase. Considering market expectations and sunk cost factors, the total network hash rate is likely to further increase. This means that the production cost of Bitcoin will be pushed higher, and over time, the proportion of high-cost Bitcoin will increase, with prices expected to rise as well. Historical data shows that the peaks of Bitcoin bull markets usually occur more than a year after the Halving.

Therefore, the logic of Halving driving a bull market is not just an emotional factor, but also includes actual cost factors. Of course, costs cannot completely determine the price of cryptocurrencies, and situations where prices fall below costs do occur.

Litecoin Halving and Macroeconomics

The market performance of Litecoin's Halving in 2023 was not as good as in 2019, which has caused some investors to worry about the upcoming Bitcoin Halving. However, we need to recognize that the good performance during the Litecoin Halving period in 2019 may be related to the broader macroeconomic environment. It is worth noting that the Federal Reserve began to cut interest rates in June 2019, which may have been an important factor driving the rise of the cryptocurrency market at that time.

Macroeconomics and Cryptocurrency Bull Market

Although some cryptocurrency investors may dismiss macroeconomic factors, in reality, Bitcoin's price movements may have been influenced by macroeconomic cycles.

By observing historical data, we can find some interesting patterns:

1. The Halving of Bitcoin is usually followed by a gap of 12-18 months before reaching a price peak.
2. There is also a gap of 9-22 months between the peak growth rate of the M2 money supply in the United States and the high point of Bitcoin prices.
3. The U.S. presidential election astonishingly maintains a consistent interval of about 12 months with the peak price of Bitcoin.

These observations suggest that the design of Bitcoin may have taken into account the policies and economic cycles of the United States. U.S. elections typically occur near the peak of the M2 money supply growth rate, which may reflect a tendency to adopt relatively loose monetary policy during election periods. Loose monetary policy increases market liquidity, and some funds inevitably flow into speculative markets.

2025 Bull Market Outlook

Although Litecoin's Halving performance in 2023 was poor, this does not mean that the Bitcoin bull market in 2025 will be affected. Bitcoin's cyclical bull markets are influenced not only by Halving but also closely related to macroeconomic factors.

The Federal Reserve's monetary policy will remain a key factor. Currently, the Federal Reserve has maintained a relatively high interest rate for a considerable amount of time. The market expects interest rate cuts to potentially begin as early as the second quarter of next year, and at the latest by the end of next year.

Considering that it takes time for the M2 growth rate to peak after the interest rate cut starts, the next bull market may be delayed until 2026. The specific timing will need to be further observed based on economic data.

Investment Strategy Recommendations

For investors looking for investment opportunities, it is advisable to closely monitor the Federal Reserve's policy signals, especially the upcoming dot plot. The dot plot may reveal two important turning points: halting interest rate hikes and starting to cut rates. These turning points could trigger a short-term market sentiment rebound, but one should not be overly optimistic.

It is worth noting that the M2 money supply in the United States has experienced negative growth for the first time since 1960, reflecting the current severe liquidity environment. Even if the Federal Reserve begins to cut interest rates, the effects of the high interest rate environment will continue for some time, and the market may face the risk of increased debt repayment pressure.

For specific investment strategies, it is advised that investors remain patient and carefully choose their entry timing. Although some smaller cryptocurrencies have shown active performance recently, long-term investments should still focus on mainstream cryptocurrencies, treating high-risk assets with caution.