The Impact of Bitcoin Halving and Its Relation to the Macroeconomy

The impact of Bitcoin Halving on the market is not just a psychological sense of scarcity, but more importantly, its substantial impact on mining costs. Halving means that the same hash power input can only yield half the Bitcoin output. Due to miners' expectations and sunk cost factors, the network hash power is likely to exceed the levels before the Halving, thereby driving up the production costs of Bitcoin. This cost increase mechanism is one of the important factors driving the rise in Bitcoin prices, usually taking more than a year after the Halving to become apparent.

However, the Halving effect alone is not sufficient to explain the bull market cycle of Bitcoin. In fact, macroeconomic factors may play a more critical role in the price movements of Bitcoin. By observing historical data, we find that the peaks of Bitcoin's bull markets are closely related to the monetary policy of the United States, economic cycles, and even political cycles.

For example, the price peaks after the last three Bitcoin Halvings were associated with the peak times of the growth rate of the M2 money supply in the United States. Interestingly, these peaks also showed an astonishing consistency with the U.S. presidential election cycle. This coincidence seems to suggest that the design of Bitcoin may have taken into account U.S. policies and economic cycles.

During the election period, a relatively loose monetary policy is usually adopted to promote economic prosperity, which leads to increased market liquidity and some funds flowing into speculative markets, including the cryptocurrency market. Therefore, the Bitcoin bull market may be the result of the combined effects of the Halving and macroeconomic factors.

Looking ahead, although the Halving effect of a certain cryptocurrency in 2023 was not as expected, it does not mean that the Bitcoin Halving in 2025 will lose its influence. The Federal Reserve will eventually start to cut interest rates, and the liquidity of the dollar will shift from tightening to easing. However, considering the current high interest rate environment and the negative growth of M2, the arrival of a new bull market may be later than before, possibly even delayed until 2026.

For investors, it is still necessary to remain patient at this stage. Although certain small cryptocurrencies may present short-term opportunities, caution should still be exercised regarding non-mainstream cryptocurrencies from a long-term perspective. The future market direction will largely depend on the Federal Reserve's policy stance, particularly the two key turning points of stopping interest rate hikes and beginning rate cuts. In this process, even if interest rates start to decline, the market may still face debt pressures in a high-interest-rate environment, thus risks still exist.