What can we expect in terms of data from Bitcoin’s halving? Are there any opportunities to participate in new projects in the Bitcoin ecosystem?
(Previous summary:
JPMorgan: Bitcoin could drop to $42,000 after halving, BTC still in overbought territory and downward trend not over
)
(Background:
Bitcoin spot ETF sees net outflow of $740 million in three days, has the selling pressure ended?
)
Table of Contents:
What is Bitcoin halving?
Historical impact of Bitcoin halving
What is the situation before halving?
Miners are selling
Market correction or further upward trend?
Updates and opportunities in the Bitcoin ecosystem
Runes
Bitcoin Layer 2 solutions
Hello, on-chain partners! This week’s trending meme packs include Wif, Pepe, Floki, and more. AI coins are showing no signs of stopping their upward trajectory, while the recent upgrade to Ethereum, known as “Dencun”, has been in the public eye. After Dencun, some Ethereum Layer 2 gas fees have dropped to 1 cent! This will be a popular upgrade for those active on the chain or participating in airdrop mining (waiting for gas fees to decrease on the Ethereum mainnet…).
However, let’s not forget about a major milestone that is about to happen – a milestone that has reshaped the crypto universe multiple times – Bitcoin halving. Let’s dive deeper!
Today, we will delve into:
What is Bitcoin halving?
In-depth analysis of key indicators in the market and whether it is ready for a correction
Getting started with the Xverse wallet and testing on the Rune testnet
Trying out the Botanix Lab’s testnet for B2 network participation
Bitcoin halving event reduces miners’ block rewards, thereby slowing down the introduction of new Bitcoin into circulation. This mechanism is crucial to Bitcoin’s economic model and aims to control its supply.
The next halving is expected to take place on April 17, 2024. After the halving, mining block rewards will be reduced from 6.25 BTC to 3.125 BTC. So how will this affect the price?
Historically, Bitcoin halving has often been a precursor to significant price increases. This trend is mainly attributed to the anticipation and realization of reduced Bitcoin supply growth, combined with sustained or increasing demand, leading to upward price pressure.
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So far, Bitcoin has experienced three major halvings:
First halving (November 2012): Block rewards reduced from 50 BTC to 25 BTC. Following this event, Bitcoin’s value rose from around $12 to over $1,100 within the following year, experiencing significant price growth. However, the market was smaller and less mature at the time, making it more susceptible to large fluctuations.
Second halving (July 2016): Rewards reduced from 25 BTC to 12.5 BTC. Similarly, in the months following the halving, prices saw significant increases, rising from about $650 to a peak of around $2,800 in mid-2017 and then continuing to climb to nearly $20,000 by the end of the year, partly due to growing retail and institutional interest in cryptocurrencies.
Third halving (May 2020): This reduced block rewards to 6.25 BTC. Bitcoin was priced around $8,600 during the halving and experienced significant volatility, breaking through $60,000 in April 2021. This rally was attributed to increased institutional adoption, economic uncertainty, and a surge in retail investors’ interest in cryptocurrencies.
Each halving helps to reduce the speed at which new Bitcoin enters circulation and, theoretically, if demand remains stable or increases, this may increase scarcity and drive up prices.
Whales are acquiring BTC
Whales have started acquiring Bitcoin.
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Bitcoin’s trading volume has significantly increased to $116.2 billion, surpassing the usual low-market periods of $10-20 billion. This increase is primarily due to increased whale activity, reaching levels not seen since August 2021.
Additionally, it seems that users prefer accumulating Bitcoin rather than Ether.
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Miners are busy earning some profits. According to Glassnode data, the “miner balance” has decreased from 1.82 million BTC to 1.808 million BTC since the beginning of the year.
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The past few months have undoubtedly been remarkable. Bitcoin has reached new all-time highs, and the market is booming across various industries. Can this upward trend continue? Will the music stop, leading to a significant correction? Let’s analyze the data for clues.
First, let’s understand how the market operates. Bitcoin is the major force that drives the entire market. Therefore, it is crucial to understand key Bitcoin indicators that provide insights into buyer and seller behavior.
A single indicator represents only one data point and may not provide much meaning on its own. However, when a series of indicators is collectively analyzed, they can provide valuable insights into the current market conditions.
The first indicator, which examines the cycles of peaks and troughs in bull and bear markets, as shown below, indicates the peaks that traditionally lead to corrections. While it has not reached the most extreme range, this trend is worth noting.
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The following indicators assess whether long-term holders and short-term holders are profitable. This is crucial because at any given moment, one or both of these groups may decide to sell if they collectively deem the current price suitable for selling. Currently, both groups are experiencing high profitability, and the influx of new funds into the market also shows significant signs. This indicator is now approaching its highest point, indicating a critical moment.
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The MVRV ratio, which stands for Market Value to Realized Value, compares the current market value of an asset with its realized value, representing the asset’s total cost basis or storage value. This indicator is crucial in assessing whether an asset’s price is overvalued or undervalued, thus providing valuable insights into the overall market profitability. It is worth noting that the significant difference between market value and realized value is an important indicator of potential market peaks or troughs, marking periods of increasing investor profitability or losses.
Currently, the MVRV ratio is rapidly approaching a key moment historically associated with significant market adjustments. Furthermore, it has surpassed previous levels that indicated an upcoming decline.
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The BTC Risk Index provides valuable insights into market risk by examining the changes in Delta Cap and market capitalization. As Bitcoin prices rise, this index decreases, and conversely, it increases when prices fall. Currently, this indicator is approaching its lowest point, indicating a potential market correction.
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STH-SOPR helps interpret when short-term holders tend to buy or sell cryptocurrencies, providing insights into market trends and potential trading opportunities. Currently, this indicator is approaching one of its peaks, indicating a trend of short-term holders selling their assets.
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Profitable supply refers to the total number of tokens in the network that currently have a higher value than their last transaction. Essentially, it tracks the number of tokens that have increased in value since their last trade.
This indicator helps identify potential market peaks by indicating when investors may start selling to realize profits. It is important to note that profitable supply only shows whether a token is profitable, not the quantity of profit acquired. This indicator is also approaching its highest peak.
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Overall, the combined analysis of key indicators indicates that the market is in an overbought and extended state. In the coming days and weeks, users should proceed with caution, reduce leverage usage, and stick to spot trading strategies. Historically, cryptocurrency corrections have often been rapid and severe. While the overall market trend remains upward, real-time indicators show concerning signs.
Now that we have gained insights into the upcoming outlook of the Bitcoin market, let’s explore some opportunities you can participate in. From Runes to BRC-20 and more, the Bitcoin ecosystem is full of early-stage opportunities for profit. Let’s explore some of them.
The Rune protocol is a new method developed by Casey Rodarmor for tokenizing assets on the Bitcoin network, aiming to revolutionize this process.
Unlike traditional models like BRC-20 and ORC-20, Rune utilizes Bitcoin’s UTXO-based system to simplify token creation and management. It allows multiple tokens to be stored in a single UTXO, reducing network congestion and improving efficiency.
Rune, set to launch at the end of April, has caused a stir in the community, sparking various projects and initiatives, such as RSIC and Rune Fever Miners, all aimed at leveraging the market’s anticipation for Rune. The release strategy includes direct minting of the initial ten tokens or participation in airdrops through pre-mined projects.
Xverse Wallet
is preparing for the launch of the Rune fungible token standard by adding support for the testnet. Xverse users can now interact with Rune tokens and applications on the testnet and plan to support the mainnet upon deployment.
The addition of Rune support is a significant step in adapting to the dynamic landscape of Bitcoin and its related protocols. Get yourself an Xverse Wallet and start using the Rune testnet with this handy video guide.
Bitcoin Layer 2 protocols are innovative solutions developed on top of the Bitcoin blockchain to address its inherent scalability issues. By processing transactions off the main blockchain, these protocols significantly improve scalability, speed up transaction times, and lower costs.
Examples of such Layer 2 solutions include the Lightning Network, Rootstock, Stacks, Liquid Network, and various Rollups. These technologies not only provide improved programmability but also extend the capabilities of Bitcoin.
While facing challenges such as potential centralization and routing issues, Layer 2 solutions are crucial in facilitating wider adoption and fostering innovation within the Bitcoin ecosystem. Additionally, many of these protocols are exploring interoperability with the Ethereum Virtual Machine, paving the way for the next wave of innovation.
Botanix Lab is developing a decentralized Bitcoin Layer 2 solution that combines the convenience of the EVM with the security of Bitcoin.
Users can connect their MetaMask wallet to generate a Bitcoin deposit address, enabling direct transfers with exchanges. It aims to provide DeFi opportunities for both Ethereum Layer 2 users and native Bitcoin users.
Botanix ensures low fees and prioritizes decentralization. It estimates that the Bitcoin DeFi market could be three times as large as Ethereum’s. Try out the testnet here and check out this great interview with Aylo and its founder, Willen S.
B2 Network is another Bitcoin Layer 2 solution that ensures security through a challenge-response mechanism using the Rollup protocol.
With these advancements, the B2 Network is ready to lead application scenarios within the Bitcoin ecosystem, including DeFi, NFTs, and SocialFi applications.
Try their testnet here.
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