Bitcoin’s price has long been associated with its four-year price cycles, which align with its “halving” schedule that reduces its inflation rate every four years. However, some analysts argue that this correlation may be coincidental rather than causal. They believe that the cyclical movements of the asset are influenced by macroeconomic conditions rather than the halving events.
Macro Conditions and Bitcoin’s Price
Crypto trading analyst TXMC suggests that the location of the Bitcoin halving is merely a “wildly convenient coincidence” that happens to coincide with other macroeconomic factors affecting Bitcoin’s price. These factors include interest rate oscillations, annualized equity returns, and manufacturing PMIs. In other words, Bitcoin behaves as an asset subject to liquidity, credit conditions, the cost of money, and the overall flow of the economy.
Another Twitter user named “Pledditor” argues that Bitcoin’s four-year cycles are mere coincidences that have no real connection to the halving. He points to the global M2 money supply, which also experiences similar four-year cycles that impact not only Bitcoin but also other risk assets. This finding aligns with a June report by Coinbase, which suggests that Bitcoin’s major bull markets align with dovish monetary policies. Previous bull markets in 2013 and 2020 coincided with significant rounds of quantitative easing by central banks.
Additional Indicators and Bitcoin’s Price
TXMC’s analysis delves deeper into the relationship between Bitcoin’s price and other indicators. For instance, metrics like high-yield corporate credit, which reflect broader risk appetite in the market, seem to track Bitcoin’s cycle tops and bottoms quite well. This observation supports the argument that Bitcoin’s price movements are influenced by macroeconomic factors rather than being solely driven by the halving events.
Supporters of the Bitcoin halving theory contend that the reduction in the number of Bitcoins produced per block every four years leads to a supply crunch that positively impacts the asset’s price. The theory suggests that with each halving event, the reduced supply creates a scarcity that drives up demand and, subsequently, the price of Bitcoin.
Some members of the Bitcoin community, such as Bit Paine, assert that the connection between Bitcoin’s halving and its price cycles is fairly obvious and shouldn’t be overthought. According to this perspective, the market price of Bitcoin is determined by the activity of marginal buyers and sellers. The halving, by doubling the marginal production cost of Bitcoin every four years, influences the market dynamics and pushes the price higher.
The next halving event is expected to occur in April 2024, cutting the Bitcoin emissions from 6.25 BTC to 3.125 BTC per block. Institutional analysts and Bitcoin miners are already considering the halving in their predictions and business strategies. For bullish investors, the halving remains an exciting time, according to crypto market analyst CryptoJack.
The relationship between Bitcoin’s halving events and its price cycles is a topic of debate among analysts and experts. While some argue that the correlation is merely coincidental and that Bitcoin’s price movements are driven by macroeconomic factors, others believe that the halving creates a supply crunch that directly influences the asset’s price. As the next halving approaches, the market will continue to observe the interplay between these factors and their impact on Bitcoin’s price trajectory.