Do you know that the price of Bitcoin has repeatedly risen after a particular event in its history?
In fact, the last three events led to massive bull runs, and in 2024, everyone’s predicting another that could significantly move Bitcoin’s price.
So, what exactly am I talking about here?
To put it simply - Bitcoin halving.
It’s an event in the evolution of Bitcoin mining where the rewards for verifying blocks of transactions on the chain are halved.
These halving events happen around every four years and will continue to do so until all Bitcoins have been mined.
Now, this, of course, sounds complicated, so let me break it down for you just to give you a better understanding.
Let's start off by explaining how Bitcoin is Mined
You see, when Bitcoin launched for the first time in 2009, only about 1.1 million coins were released for circulation.
The others were supposed to be released gradually through mining.
Mining is essentially how new Bitcoins are generated - by verifying and validating transactions on the blockchain.
This process of verification and validation is basically done by solving complex mathematical problems using computer hardware.
So accordingly, validating transactions has some big costs!
Those who do it spend money on electricity and building the computer hardware setups needed to do the job.
For this reason, it makes sense that they should get a monetary reward for securing the Bitcoin network, right?
Well, they are actually rewarded with the new Bitcoins generated when a block of transactions is validated.
As of today, 19 million Bitcoins have been mined and are in full circulation.
But How Is This Related to The Halving Event?
Let’s look at how Mining and Halving are Connected
Well, the reward for validating transactions on the Bitcoin network, as I have explained before, is paid using newly generated Bitcoins, right?
However, this reward is actually fixed.
As it turns out, when Satoshi Nakamoto launched Bitcoin in 2009, he set the reward to 50 Bitcoin.
But he did not finish there.
In order to regulate mining and reduce Bitcoin’s inflation, Nakamoto also decided that this 50 Bitcoin reward would be halved after mining 210,000 Blocks - which can be performed in about four years.
So, when the first halving event happened in 2012, the reward dropped to 25 Bitcoin.
The Second halving event came in 2016, when the reward for validating transactions dropped to 12.5 Bitcoin.
The third halving event came in 2020, and just like four years before, the reward dropped by half, this time to 6.25 Bitcoin.
The next halving event is expected to take place around April 2024 where the reward for validating a block of transactions will drop from - you guessed it - 6.25 Bitcoin to 3.125 Bitcoin.
This could be a significant moment in the history of Bitcoin, and you’ll see why later in the article.
Alright, so this all begs the question - what does halving have to do with overall Bitcoin Value?
Here’s how Halving Events Have Affected Bitcoin Price
Now, before I get to the historical analysis, let me just take a minute to explain to you why these halving events are important.
Essentially, the goal of Bitcoin halving events is to significantly reduce the supply of Bitcoin.
Whenever a halving event occurs, it means that the number of new bitcoins entering circulation reduces significantly.
This then leads to a degree of scarcity, and as basic economics will teach you when supply contracts but demand increases, prices tend to go up.
So, based on this understanding of supply and demand, let's see how the price of Bitcoin behaves when halving occurs.
First, let me go back to 2012 during the first halving event, and at the time, the price of a single Bitcoin was roughly around $12.
I know, it’s hard to believe right?
However, after the 2012 halving, the price soared, hitting $1,031 less than 12 months later.
The 2016 Halving event was, however, a bit interesting.
Bitcoin didn’t experience the same bull run as was seen in 2012.
In fact, in the few months after the 2016 halving event, Bitcoin traded sideways for some time before it faced a major sell-off, dropping from a peak of around $750 to around $533.
However, this sell-off was actually half of the story.
This is because, after Bitcoin bottomed at around $500 following the 2016 halving event, it began an unprecedented recovery and would go on to reclaim the $1000 price tag by the start of 2017.
Bitcoin would go on to hit an all-time high of $20,089 on December 17th, 2017.
With history out of the way, what about more modern events?
Moving on, let’s look at how the last halving event affected Bitcoin price.
Well, as you can probably guess, it was quite literally the same trend.
The third halving event came in 2020, which was a very difficult year for Bitcoin.
Prices had significantly crashed from the all-time high of $20,089 achieved in 2017.
Also, Bitcoin had hit its 2020 low of $3858.
However, the price action would soon start to recover shortly before the Halving event in May 2020 and would maintain the same upward trajectory afterwards.
In fact, in the two months before the 2020 Halving event, Bitcoin jumped from its 2020 lows of $3858 and rose above $10,000, a nearly 3x growth in just eight weeks.
This bull run continued after the halving event, and eventually, Bitcoin would surge above $30,000 by the end of 2020.
It’s not all just facts and figures though, there’s potential profit in this data.
So, What Can Be learnt from the connection between Halving and Price?
First, the history of halving appears to suggest that Bitcoin typically soars after these events.
However, it seems that this growth tends to peak after a period of at least 12 months.
Secondly, a price surge a few months before the halving event is seen as likely, with investors accumulating Bitcoin in anticipation of a bull run.
Just such a scenario played out during the 2020 halving.
It suggests that investors were trying to accumulate as much crypto as possible with the hope that once the halving occurs, the price will surge.
As a result, there was some temporary demand even a few weeks before the halving.
Thirdly, it is also safe to say that these halving events are some of the most consequential and perhaps the most anticipated events in the crypto world.
With the past now fully realized, what does Bitcoin halving mean for the future?
What to Expect during the 2024 Halving
First, no one is sure exactly when the 2024 halving event will take place.
However, it is expected to happen somewhere around April.
So, what can you expect?
If history is to be repeated, there will be a major surge in Bitcoin in the months following the 2024 halving.
Whether this surge will be enough to push Bitcoin to new all-time high remains to be seen.
However, most crypto analysts are very bullish.
Secondly, I expect that the 2024 halving event will be watched closely by most investors.
As such, a period of accumulation may happen shortly before the event, something that could trigger a temporary price surge.
Now, please note that there could be other risk factors that may affect the price of Bitcoin even after the halving event.
Conclusion
And there you have it!
In this article, you took a deep dive into the world of Bitcoin halving.
You witnessed the historic peaks and valleys of Bitcoin prices and saw how halving events have played a role in shaping these trends.
First, I broke down the process of Bitcoin mining and how it creates new Bitcoins.
Remember, miners are rewarded for their crucial role in validating transactions on the blockchain.
Then, you learned about the concept of halving itself, which is a pre-set event that halves these mining rewards about every four years, or after 210,000 blocks are mined.
This event is designed to manage the supply of Bitcoin and help curb inflation.
You also saw the significant impact halving has on Bitcoin prices.
As mentioned, halving events reduce the number of new Bitcoins entering circulation, creating scarcity and causing prices to soar.
Looking to the future, the next halving event is expected around April 2024.
While it can't be predicted with certainty, historical trends suggest there may be similar price movements up ahead.
I hope this deep dive into the world of Bitcoin halving has been insightful. Talk to you soon!
