Introduction
Bitcoin's price moves in cycles based on the mining reward halving. Three halvings have already taken place: 28 Nov 2012, Jul 9 2016 and May 12 2020. Like clockwork, the mining reward halvings have reduced the stock-to-flow ratio of Bitcoin by 50% each time. The resulting supply crunch has always caused the price to rally and reach a blow off top resulting in a bear market and an eventual new bull market sparked by the next mining reward halving.
Bitcoin bull markets driven by different factors after each mining reward halving
The first one that occurred after the November 2012 halvening was driven by Bitcoin becoming a globally traded digital asset accepted by some merchants such as the 1000 using Bitpay (already in October 2012).
The second one that happened after the July 2016 halvening was driven by the ICO mania and retail FOMO. The year 2017 marked the rise of altcoins including Ethereum. In January 2017, the price of ETH was around $11 and a year after it peaked at $1400.
The third one took place in May 2020. It is driven by institutional investors who believe macroeconomic conditions favor a form of digital hard money with a supply cap. Custodial solutions secure enough for institutional customers ready to invest hundreds of millions or billions already exist.
What will drive the next bull market?
What I'm wondering is whether the post 2024 halving bull market will be driven by central banks stocking up on Bitcoin as a reserve asset. Central banks possess gold as a reserve asset. If Bitcoin is gold 2.0, then it stands to reason to expect central banks to want to buy it. The ability of the US to get extremely cheap credit and not care about balancing its budget stems from the US dollar being the reserve currency held by most central banks around the world, a lot of debt around the world being denominated in USD, a lot of world trade being done using USD as the currency etc.
The European Central Bank headquarters in Frankfurt am Main, Germany
However, the share of the US of international trade and the global GDP has been decreasing by 0.25 percentage points a year for decades. It's only natural as the rest of the world has been catching up. There already are plans in effect to replace the dollar as the dominant currency of world trade. China in particular is projected to pose a challenge to the dollar hegemony owing to the sheer size of its economy and the rate at which it grows. China is also advancing rapidly in key technological sectors. The importance of the dollar has decreased also in Europe after the introduction of the euro around the turn of the century.
The writing is on the wall regarding the end of the dollar hegemony. However, I think it is doubtful that it will be replaced by another hegemony. I think we're headed toward a world where there will be multiple centers of economic and monetary power. Absent extremely robust scalability solutions, I think Bitcoin is unlikely to become a world currency. But it stands a change of being added to a mix of reserve currencies held by many central banks in the world as it matures.
Conclusion
The question is whether that process will begin 4-5 years from now or if the ecosystem will remain too immature for that. My take is that this is probably something that might drive the post 2028 or the post 2032 halvening bull runs.