The Bitcoin ( BTC ) halving has had a major impact on the cryptocurrency world. The next event planned for 2024 may once again affect the Bitcoin price: let’s see how.
Bitcoin halving is when the rewards for miners to verify transactions on the BTC blockchain are cut in half every four years. This event occurred as a mechanism to control inflation and reduce the rate at which new Bitcoins enter the market.
The halving has a significant impact on miners as their profitability is also halved. The halving also caused BTC prices to surge - as limited supply drove up demand.
As the upcoming halving event approaches next year, the market is full of expectations. This halving could push Bitcoin to new all-time highs, surpassing the 2021 peak of $68,789.
This article will cover all the information you need about the Bitcoin halving, how it affects the market and stakeholders, and everything else. But first, let’s understand what Bitcoin Halving is.
What is Bitcoin Halving
Think of the Bitcoin halving as the web’s version of a cost-of-living adjustment. The Bitcoin halving is a predetermined event in the Bitcoin network. It occurs every four years, or after 210,000 blocks are mined, and reduces the block reward by 50%.
So, before the 2020 halving, miners used to get 12.5 Bitcoins to validate a block, but now they only get 6.25.
The 2020 halving is the third halving since the birth of Bitcoin in 2009. The first halving occurred in November 2012, reducing the block reward from 50 Bitcoins to 25 Bitcoins per block. The second occurred in July 2016, reducing the reward from 25 Bitcoins to 12.5 Bitcoins.
The idea behind the halving is that Bitcoin’s creator, Satoshi Nakamoto, identified the total supply of Bitcoin as 21 million coins. These halvings help ensure BTC’s scarcity as it slowly reduces the number of new Bitcoins created until the supply is exhausted, which will be completed in 2140.
Additionally, the event helped maintain Bitcoin’s deflationary nature, which limits its circulating supply and increases the cost of mining BTC.
As a result, the Bitcoin network is considered more secure because the incentive to attack it with more powerful computers (known as a "51% attack") becomes less tempting.
Impact of Bitcoin Halving on Different Stakeholders
The long-awaited Bitcoin halving has been a source of great interest among all stakeholders, including miners, investors, and cryptocurrency exchanges. So, let’s see how each of these stakeholders can benefit from it:
miner
After the halving, Bitcoin miners will earn only half of their previous earnings. In short, they have to work twice as hard to get the same reward. Therefore, it’s no surprise that miners’ expectations for the halving are unusually high.
However, the halving is not necessarily a bad thing for miners. Since there is a limited amount of Bitcoin that can be mined, the halving helps miners maintain profit margins. This means miners can enjoy the same rewards without having to mine more.
investor
The halving is a great opportunity for investors as it typically causes Bitcoin prices to surge. This momentum often has a ripple effect on other cryptocurrencies and can lead to profits for investors.
The price surge also allows investors to take advantage of low-cost entry points and potentially increase profits.
cryptocurrency exchange
For exchanges, the halving is a mixed blessing. On the one hand, it is an exciting event that attracts many traders, resulting in an increase in trading volume.
On the other hand, it can also be a cause for concern, as a sudden surge in activity can cause technical glitches and lead to network congestion.
Ultimately, it is clear that the Bitcoin halving will affect all stakeholders differently, but will ultimately lead to positive results.
How each stakeholder benefits depends on their goals and strategies, so the impact of the halving must be carefully considered before making any decisions.
The impact of previous halvings on the market
The market impact of previous Bitcoin halvings is often referred to as the “halving effect.” In other words, the halving can be seen as a catalyst for major market events.
Statistics from the past three halvings show that the price of Bitcoin increased significantly in the long term after each halving.
The first halving in November 2012 saw the BTC price rise from around $11 to a high of $948 in December 2013.
The second halving occurred in July 2016, and by December 2017, BTC value increased from around $650 to a high of $13,650.
Finally, during the third halving in May 2020, the price surged from around $8,200 to a peak of $68,789 in November 2021.
When the hit rate is halved, miners are rewarded with fewer tokens for their work, causing a supply shock and causing prices to rise as scarcity-driven demand puts more pressure on the currency's availability.
This impact has become so predictable that the market actively anticipates them, resulting in an influx of buyers before each event.
It’s important to note that the halving effect can vary from cycle to cycle, so while it may have had a bullish impact in the past, it’s not guaranteed to happen every time.
That being said, if the past is any indication, the halving effect may continue to impact the market in the future.
The road ahead: What to expect from the next halving?
The halving event has been an important catalyst for Bitcoin price increases. As the chart above shows, Bitcoin’s price began to rise steadily in the 500 days leading up to its most recent halving. After the halving, the price of Bitcoin skyrocketed as it had in the previous two years.
Therefore, Bitcoin may experience a similar promising price increase in the days leading up to the fourth halving, scheduled for May 2024, when the block reward will drop to 3.125 BTC.
After the halving, Bitcoin is expected to make a decisive move higher and possibly even reach new higher levels.
