Boosting Fiat Money Supply Growth is Key to Igniting Bull Run, Halving Alone Isn’t Enough for Bitcoin

Although the next Bitcoin mining reward halving in April 2024 is anticipated to be a bullish catalyst for the cryptocurrency market, historical data suggests that a significant uptrend will depend on major central banks increasing their year-on-year money supply growth rates.

Previous halvings did not single-handedly trigger bull runs, but rather macroeconomic factors, particularly abundant fiat liquidity, played a vital role. The reward halving occurs every four years, reducing the rate of Bitcoin’s supply expansion. In the months following previous halvings, Bitcoin experienced triple-digit price rallies before entering bear markets. These bear markets generally ended around 15 to 16 months before the next halving, coinciding with the timing of previous price bottoms.

Bitcoin's halving-focused four-year market cycles (Bitwise)

To gauge the potential impact of the next halving, it is crucial to monitor the year-on-year M2 money supply growth rates of major central banks like the US Federal Reserve, European Central Bank, Bank of Japan, and People’s Bank of China.

The higher M2 goes, the higher bitcoin price could go. (MacroMicro)

Higher growth rates in M2 money supply have historically accompanied post-halving bull runs, while bear markets corresponded with a deceleration in money supply growth. Therefore, the fate of Bitcoin’s price movement is closely tied to the liquidity conditions of fiat currencies.