The classical Bitcoin theory about halvings is that they "cause" bull-markets because the supply mined gets halved, leading to a negative supply shock and therefore increasing the value per Bitcoin.
This is not a surprising theory since it makes a lot of sense and has worked in the past. But, is the halving really that important for the Bitcoin price?
I've plotted the balance sheets of the largest central banks in white. If this line goes up, it indicates an expansion of the balance sheet (Quantitative Easing / QE), which can roughly be interpreted as printing money. It appears that Bitcoin bull- and bear-markets are highly correlated with central banks expanding their balance sheets. White line goes up, BTC goes up, white line goes down (or sideways) BTC goes down.
I've marked two previous occurrences where the central banks started QE in purple. Bitcoin arguably started the bull-market from those points, and not once the halving (yellow) took place.
From this chart we can conclude that the Central Banks are a decisive factor in the start and end of Bitcoin bull markets. Sure, the halving is a highly anticipated event among retail investors and manages to revive the interest into crypto, but I'd argue that QE (= a better investing climate) is the main reason why Bitcoin goes up and down in cycles.
In other words, we can have a BTC bull-market during a period of QE without the halving taking place. We can't have a bull-market after the halving without QE.
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Comment
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Central banks balance sheet formula in Tradingview:
statistics can be highly misleading. coincidences happen all the time. it is a somewhat interestinf topic worth reading about
ArmanShabanTrading
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very helpful.
FirstNameHelen
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High quality stuff, keep on the good work!
DeGRAM
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Thank you for sharing your analysis
neandertroll
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is there any prediciton on when will they do QE again?
FieryTrading
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@neandertroll, QE started in October 22 because of the looming banking crisis, but balance sheets have been going down for weeks already. When the central banks (read FED) will break something major, you can expect longer periods of QE.
NoaTrader
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Nice job! Thank you for sharing it. How about comparing the balance sheets with Gold for a longer time? Bitcoin and Gold may have a lot similar reactions...
FieryTrading
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@NoaTrader, already made an analysis where I compared BTC and GOLD price action. Since this year, BTC appears to be following gold more closely than stocks.