Bitcoin Halving Is Nice, but Kickstarting Bull Run Requires Fiat Money Supply Growth

Bulls hope for a boost from next year's halving, but historical data suggests a substantial uptrend depends on significant year-on-year M2 money supply growth rates from major central banks.

The crypto market eagerly anticipates Bitcoin's fourth mining reward halving, set for April 2024, hoping for a substantial bullish surge, as it has traditionally acted as a significant catalyst. However, it's worth noting that past halvings didn't single-handedly trigger bull runs. Macro factors, particularly abundant fiat liquidity conditions, played a crucial role, as per MacroMicro's data.

Reward halving is an inherent feature reducing Bitcoin's supply expansion by 50% every four years. The upcoming halving will decrease miners' block rewards from 6.25 BTC to 3.125 BTC.

Previous halvings occurred in November 2012, July 2016, and May 2020, preceding Bitcoin's triple-digit price surges to new all-time highs within the following 12-18 months before entering significant bearish trends.

These bear markets typically lost momentum around 15 to 16 months before the next halving. Bitcoin's 56% gain in 2023 aligns with the timing of previous price bottoms, signaling a recovery from the previous year's bear market depths.

The anticipated uptrend triggered by the halving should not overlook the significance of the year-on-year M2 money supply growth rates of major central banks, including the U.S. Federal Reserve, European Central Bank, Bank of Japan, and People's Bank of China. These central banks play a pivotal role in determining the magnitude of the expected halving-driven market movement.

The collective M2 money supply of these four major central banks reflects the total value of their respective fiat currencies in circulation.

In the past, the bull runs following halving events were consistently associated with an aggregate M2 money supply growth rate of 6% or higher from the U.S. Federal Reserve, European Central Bank, Bank of Japan, and People's Bank of China. Conversely, bear markets correlated with a slowdown in the money supply growth rate.

This pattern reinforces the widely held notion that Bitcoin's performance is closely linked to fiat liquidity conditions, emphasizing its role as a direct reflection of the fiat money landscape.