Bitcoin has demonstrated resilience by climbing back above US$90,000 (AU$141,021), yet its post-halving performance continues to be a subject of scrutiny. The digital asset broke out in the last few days, buoyed by increasing global economic turmoil. This increase puts pressure on historic price expectations set by preceding halving cycles. Macroeconomic conditions and liquidity are increasingly driving Bitcoin’s price action. Yet their power is greater today than ever before.
Economic Uncertainty Dampens Post-Halving Surge
Bitcoin’s disappointing rally comes at a time of increasing global economic uncertainty. Of all sources, escalating trade tensions—especially those associated with Trump’s tariffs—add the most to this uncertainty. The Economic Policy Uncertainty Index, one of the most important indicators of macroeconomic instability, now averages over 317.
In the same timeframes after the last couple halvings the index was averaging much lower numbers. Six months after the halving this index averaged 107 in 2012, 109 in 2016, and 186 in 2020. This cycle, the macroeconomic climate is having a larger influence on Bitcoin’s price action than in past cycles. This sharp contrast further emphasizes the dramatic shift that has taken place.
The Shifting Dynamics of Bitcoin's Price
There is an ever-increasing sense among Bitcoiners that Bitcoin’s historical ‘4-year cycle’ is losing its potency. As a result, liquidity and macroeconomic factors are now seen as the main drivers of Bitcoin’s price action. This development is reflective of a maturing market that is being affected by larger economic factors, not just by the halving events.
Bitcoin’s price performance one year after the halving has proportionally been the worst on record. Percentage price appreciation of Bitcoin has come up short compared to prior cycles. Similarly, after the 2012 halving Bitcoin moonshot by 7000%. Next, it went up 291% after the 2016 halving and shot up 541% after the 2020 halving.
Macroeconomic Factors Take Center Stage
That’s about four times the historical pattern and markedly different from what’s happening in the data. The elevated levels of economic uncertainty, as reflected in the Economic Policy Uncertainty Index, appear to be tempering Bitcoin's post-halving surge. The index is about three times as high as in prior cycles, highlighting the extreme effects that macroeconomic conditions are having.
These factors together create a story where Bitcoin’s price movements are ever more linked with wider economic movements. The cryptocurrency market moves fast. As it continues to grow, more inclusive models must begin to evolve that better factor in the outsized effect of external economic variables.
