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10 min read · Dec 22, 2023
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Bitcoin Halving is an event that reduces the mining rewards by 50% and occurs approximately every four years. The next Bitcoin Halving is expected to take place around April 2024.
The Bitcoin Halving event in 2024 has a significant impact on the dynamic cryptocurrency market and attracts the attention of Bitcoin enthusiasts and global investors. The next Bitcoin Halving is scheduled for April 2024, where the block reward will decrease by 50% from the current 6.25 BTC to 3.125 BTC per block.
Following the Litecoin halving in 2023, current interest is primarily focused on Bitcoin halving. This event, occurring approximately every four years, is a crucial moment in the life of the world’s first cryptocurrency — Bitcoin. It is a time of speculation, speculation, and profound economic impacts.
Bitcoin Halving reduces rewards for mining companies and may affect BTC mining profitability. This forces Bitcoin mining companies to adapt and become more efficient. Historical data also shows that Bitcoin mining can significantly impact the price of Bitcoin. Although halving often leads to an increase in BTC prices, it can cause short-term price volatility. As the largest and most widely adopted cryptocurrency in terms of market capitalization, this significant event can also affect the broader cryptocurrency market.
What is Bitcoin Halving?
Bitcoin Halving is an event that occurs approximately every four years or after around 210,000 blocks are mined (at a rate of one block every 10 minutes). It is a mechanism deeply embedded in the source code of Bitcoin, reducing the block rewards for miners for each mined block, hence the term “halving.”
The halving process is crucial to the Bitcoin system as it controls the supply of new bitcoins entering the market. By reducing mining rewards, the halving process slows down the rate of creating new bitcoins, thereby controlling inflation. It is also an event that generates significant interest and speculation in the cryptocurrency market.
Mining a block refers to validating transactions and recording them into a block added to the Bitcoin blockchain. When Bitcoin was first created in 2009, the reward for mining a block was 50 bitcoins. Since then, halving events over the years have halved the block reward to the current 6.25 BTC.
Why Does Bitcoin Halving Occur?
Bitcoin Halving is part of Bitcoin’s monetary policy, embedded in the Bitcoin protocol by Satoshi Nakamoto, the creator of Bitcoin. The halving reduces the rate at which new bitcoins are created, mimicking the scarcity and deflationary aspects of precious metals like gold.
Bitcoin’s Proof of Work (PoW) is a consensus mechanism that requires miners to solve complex mathematical problems, using substantial computational power to add a new block to the network, for which they are rewarded with a portion of the newly mined Bitcoin. This process, while energy-intensive, secures the network and ensures the validity of transactions.
On the other hand, Ethereum transitioned to a Proof of Stake (PoS) consensus mechanism in September 2022 as part of the Ethereum 2.0 upgrade. The Ethereum PoW blockchain previously used selected validators to create new blocks based on the amount of Ethereum they held and were willing to stake as collateral. This approach is less energy-intensive while maintaining the integrity and security of the network.
Interesting fact: As of August 2023, the circulating supply of BTC is over 19.46 million out of a total supply of 21 million. Halving events slow down the pace of mining new BTC, extending the days to mine all 21 million BTC. There are approximately 31 more Bitcoin halving events scheduled. Therefore, based on Bitcoin’s four-year halving schedule, the last Bitcoin is expected to be mined around 2140.
How Does Bitcoin Halving Work?
Each Bitcoin block consists of new transactions that have occurred in the Bitcoin network. Miners commit these transactions to the blockchain and are rewarded with a specific amount of Bitcoin in exchange for their services.
A large number of Bitcoin mining tools are distributed globally to prevent 51% attacks on the blockchain by maintaining a decentralized network. No single miner or mining group controls more than 50% of the total mining power, making blockchain manipulation extremely difficult and costly.
Bitcoin Halving operates automatically, with the code executing an “update” after every 210,000 blocks, reducing the mining reward given to miners when adding a block to the blockchain.
When Will the Next Bitcoin Halving Occur?
Bitcoin Halving takes place approximately every four years or after every 210,000 blocks are generated. The fourth Halving is expected to occur in April 2024, reducing the block reward from 6.25 BTC to 3,125 BTC at block height 840,000, marking another significant milestone in Bitcoin’s economic model.
Every Bitcoin Halving event is closely monitored and observed with the help of Bitcoin Halving countdown clocks.
Interesting fact: While 100% of BTC is expected to be mined around 2140, over 98% will be mined by 2030.
Why Is Bitcoin Halving Important?
Born out of the global financial crisis of 2008–2009 when leading fiat currencies like the US dollar depreciated significantly, an anonymous figure known as Satoshi Nakamoto created Bitcoin to counter the inflation risks associated with fiat currencies. Bitcoin (BTC) is designed as a store of value with a fixed supply of 21 million.
Bitcoin Halving directly affects the amount of new bitcoins the network creates, and reducing the block reward after each halving event creates scarcity, mimicking a reduction in the supply of new bitcoins entering the market.
Unlike some other deflationary cryptocurrencies, Bitcoin relies on the halving mechanism to support its value despite its inherent deflationary design until all 21 million BTC are mined.
Bitcoin Halving impacts the ecosystem on two main fronts:
Miners, aiding in transaction verification and maintaining decentralization.
Investors, traders, or BTC holders.
Let’s see how halving affects both sides!
How Does Bitcoin Halving Affect Bitcoin Miners?
Bitcoin Halving directly impacts mining profitability by reducing the block rewards or the amount of bitcoin miners receive for verifying transactions and adding new blocks to the blockchain.
Although it may lead to short-term challenges for some miners, it plays a crucial role in maintaining the value and scarcity of the cryptocurrency over time.
Reduced Mining Rewards:
Reducing the block rewards after each halving significantly affects the income of miners by halving the rewards for transaction verification. This translates to a reduction in the income of miners in the short term because they receive fewer bitcoins for their efforts.
Halving can lead to the phenomenon of smaller individual miners working less efficiently becoming unprofitable, resulting in consolidation within the mining ecosystem as larger players take the lead. However, Bitcoin mining can still be profitable even with reduced block rewards if the value of Bitcoin increases in the future.
Miners may mine BTC and sell them at higher prices when the market shifts to an upward trend. They can employ risk mitigation strategies in the futures market by leveraging Bitcoin to maximize their profits.
Impact on Mining Difficulty and Profitability:
Reducing the reward may temporarily alleviate mining difficulty if some miners exit the Bitcoin network due to decreased profitability.
However, it is essential to note that mining difficulty is almost unaffected by previous halving events due to the long-term capital commitment of BTC mining companies. Investing in significant computational power is costly, and any downtime can negatively impact the potential profitability of miners. As previous halving events did not witness a significant decrease in mining difficulty, most miners choose to continue mining after halving events, even if they are currently not profitable, with hopes of earning profits in the next bullish trend.
Security of the Bitcoin Network
Bitcoin Halving can indirectly impact the security of the Bitcoin network by increasing miners’ profitability threshold. If the BTC price does not catch up quickly enough, some mining machines may become overpriced and forced to shut down.
In theory, this concentration of mining power among fewer participants could make the network more susceptible to a 51% attack. However, the current Bitcoin network is extremely large and diverse, and minor differences in computational power for securing the blockchain are not significant.
How does Halving affect Bitcoin investors?
Unlike miners who fear Bitcoin Halving and hope for a quick price recovery to maintain profitability, investors approach every halving event with expectations of substantial profits.
Bitcoin Halving reduces the number of newly created Bitcoins by half, potentially creating scarcity if demand continues to rise, thus driving the BTC price higher.
Although halving events usually bring price benefits to BTC, they can also cause short-term price volatility. Traders and investors may react uncertainly to this event, leading to fluctuations in the days and weeks around the halving.
However, despite the historical significance of halving events in Bitcoin, their impact on the Bitcoin price also depends on several fundamental motivations, including:
Global macroeconomic conditions, such as changes in the interest rates set by the US Federal Reserve, which can cause price fluctuations in Bitcoin.
Institutional investor sentiment towards Bitcoin, such as the introduction of a Bitcoin ETF to the market. If the SEC approves Bitcoin ETF applications, it will boost higher institutional interest in investing in Bitcoin, supporting BTC prices and vice versa.
Technological developments within the Bitcoin ecosystem, such as Bitcoin upgrades, can influence market demand for Bitcoin as an investment opportunity. These developments play a role as building blocks that generate user and investor interest, potentially leading to increased demand for Bitcoin and its corresponding price increase.
The overall sentiment in the cryptocurrency market, influenced by various factors, including technological advancements like artificial intelligence (AI) and changes in the global economic landscape, can also impact Bitcoin prices.
Based on Bitcoin price charts and previous halving events, it may take several months to over a year after the event to see significant price increases. Let’s examine past events and how they affected BTC prices.
Bitcoin Price Prediction after Bitcoin Halving
Historical data shows that Bitcoin Halving has a significant impact on Bitcoin prices.
Accumulation Phase: Bitcoin undergoes market fluctuations (generally with a slight upward trend) during the accumulation phase before the first, second, third, and the current halving. The average accumulation cycle lasts from 13 to 22 months. As mentioned, Bitcoin has traded slightly upward or sideways during this phase.
Bull Phase: After the accumulation or consolidation phase comes the bull phase, each lasting from 10 to 15 months. BTC experienced at least one major price correction during that period, with the price recovering quickly and reaching new highs afterward.
Pullback/Bear Phase: All bull phases after halving end with a correction. While the first halving’s pullback lasted over 600 days, the last two pullbacks lasted about a year.
The recent halving event began with an accumulation phase oscillating from the market low of around $3,300 to just below $14,000. Next was a sudden surge bringing BTC above $69,000. However, as mentioned, BTC faced a significant price correction during the bullish phase. Finally, the largest cryptocurrency by market capitalization entered a bear market, with the price dropping over 77%.
Bitcoin Halving Chart on a logarithmic scale
Bitcoin Halving Chart | Source: KuCoin TradingView
Based on previous market cycles, we can assume that BTC is currently in the accumulation phase before halving, with the price trading sideways for just under a year. We may witness increasing market instability and numerous conflicting news surrounding this space. However, the majority of analysts, institutional investors, and financial prediction models anticipate a bright future for BTC in the coming times.
If history repeats itself, we can expect trading to trend sideways or experience slight declines for less than a year (250–350 days). This will extend the accumulation phase after the BTC halving, preparing the market for another strong bullish phase and a rising market.
When it comes to price predictions, we can first access the Bitcoin Stock-to-Flow model, predicting a price level of around $460,000 in May 2025 and just under $200,000 in 2024. However, it can be observed that the percentage increase in the previous price surges is decreasing. Assessing the previous percentage decrease, we can expect the increase to not exceed 500%. However, this does not account for the increasing interest from US institutions and the potential massive capital influx into the largest cryptocurrency, which could impact the Bitcoin price positively.
Let’s explore what various analysts say about BTC halving:
According to Pantera Capital’s research, Bitcoin will reach nearly $150,000 in the next 4-year halving cycle.
Lowest Price Forward predicts BTC will surpass $100,000 by 2026.
Bitcoin investor, author, and co-founder of Bitcoin investment firm Onramp, Jesse Myers, predicts BTC will surpass $100,000, but not before the next halving.
“Rich Dad Poor Dad” author Robert Kiyosaki agrees with the prediction of a price exceeding $100,000 after halving.
Adam Back, CEO of Blockstream and one of those quoted by Satoshi Nakamoto in the Bitcoin whitepaper, has forecasted BTC to reach over $100,000 even before the next Bitcoin halving.
Samson Mow, CEO of Jan3, shares a similar view to Adam Back, expecting Bitcoin to reach new highs before the halving, not afterward.
Standard Chartered, a leading investment bank, has adjusted its Bitcoin prediction to $120,000 by the end of 2024.
CEO of investment management firm Ark Invest, Cathie Wood, is confident that the price of Bitcoin will reach $1.5 million by 2030.
How does Bitcoin Halving affect other cryptocurrencies?
As the largest cryptocurrency by market capitalization and market dominance, Bitcoin’s price fluctuations play a crucial role in determining price trends in most (if not all) altcoins. Some altcoins, such as Ethereum (ETH), have particularly close market relationships with Bitcoin. When Bitcoin undergoes significant price fluctuations due to halving events, it can influence a broader market, including altcoins like Ethereum.
Renowned cryptocurrency strategist Michaël van de Poppe recently shared his opinion on the optimal time to invest in altcoins before Bitcoin halving. Van de Poppe claims that the ideal period to invest in altcoins is 8 to 10 months before Bitcoin Halving, as market confidence is at its lowest during that time.
Based on historical data and various cryptocurrency pair cycles, van de Poppe emphasizes that trading pairs like ETH/USD and ETH/BTC reached their lows in cycles in September 2019 and October 2015, respectively — both precisely 252 days before the Bitcoin halving event.
Note: If history repeats itself, these trading pairs are expected to reach their lowest points in the cycle at the end of August or early September 2023.
Conclusion
Bitcoin Halving is a crucial event in the cryptocurrency market, impacting miners, investors, and the overall market sentiment. While historical data suggests that Bitcoin prices tend to rise in the long term after halving events, short-term price volatility is also common.
Traders and investors should carefully assess their risk tolerance, conduct thorough research, and consider various trading strategies based on their experience and market outlook. Whether it’s buying and holding Bitcoin, margin trading, futures trading, staking, spot trading, or dollar-cost averaging, KuCoin provides a platform that caters to various trading preferences.
As the Bitcoin Halving in 2024 approaches, the cryptocurrency market is likely to experience increased attention and speculation. By staying informed and making informed decisions, traders can navigate the market dynamics and potentially capitalize on opportunities presented by this significant event.
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