The global cryptocurrency market is focused primarily on Bitcoin’s (BTC) fourth mining reward halving anticipated in April 2024. This event is eyed as a potential game changer, considering its reputation as a key bullish trigger.
Traditionally, Bitcoin‘s halvings, programmed to take place every four years, halve the rate of supply expansion, thereby making the digital asset more scarce. The upcoming event will trim down miners’ per-block reward from 6.25 to 3.125 BTC. Since the inception of BTC, several such events have occurred, specifically in November 2012, July 2016, and May 2020. Each of these halvings was followed by a significant upswing in the price of BTC, registering an impressive triple-digit rally. However, the gains were typically short-lived, as bear markets ensued about 15 to 16 months later.
However, it’s worth pointing out that the bull runs did not transpire due to the halvings alone. Macro factors almost definitely chipped in, primarily in the form of fiat liquidity conditions. The more abundant these conditions, the more BTC seemed to thrive. Ergo, central banks around the globe, like the U.S. Federal Reserve, the European Central Bank, Bank of Japan, and People’s Bank of China, play an undeniable role in this equation.
In fact, past post-halving bull phases have been accompanied by an aggregate M2 money supply growth of 6% or higher from the aforementioned central banks. Conversely, slowing growth rate of money supply often heralded bear markets. This lends credence to the widely held belief that Bitcoin’s fortunes are intimately tied to fiat liquidity.
Currently, despite the M2 money supply growth rate showing a positive trend, it is languishing below the critical 6% threshold. A host of central banks have been hiking rates in an aggressive bid to rein in inflation, which makes the odds of fresh liquidity easing in the near future look unlikely.
Given these conditions, the burning question is whether Bitcoin can replicate its past dizzying highs post the 2024 halving. However, with varying fiscal stances across major economies and a tightening financial milieu, the picture is far from clear, adding another layer of intrigue to the ever-volatile world of cryptocurrencies.
Source: Coindesk
