Those who know about Bitcoin a little bit would already know about the concept of Halving. And with the next Halving event expected around May 2024, it might be interesting to see how historical halving events have panned out.
Please note that this is not investment advice or anything but just a general discussion about the concept of Bitcoin Halving and how historically, it has potentially influenced the price range in which Bitcoin moves around the halving events.
What is Bitcoin Halving?
Bitcoin halving is a built-in feature of the Bitcoin protocol. Bitcoin halving is a periodic event that occurs after every 210,000 BTC blocks are mined or roughly every 4 years. It reduces the reward that Bitcoin miners receive for finding a new block by half of what it was previously.
Coming back, the halving event in Bitcoin’s protocol is designed to control inflation and ensure a steady, predictable supply of bitcoins. As per Bitcoin enthusiasts, this is in stark contrast to conventional fiat currencies, where many central banks can modify the money supply unpredictably and at their discretion. The combination of Bitcoin’s fixed total supply of 21 Million and the decreasing creation rate creates scarcity, which many Bitcoin aficionados theorize could drive its value upwards over time.
There have been quite a few halving events in the past.
The first Bitcoin halving occurred on November 28, 2012, when the block reward was cut from 50 bitcoins to 25 bitcoins. The second halving occurred on July 9, 2016, when the block reward was cut from 25 bitcoins to 12.5 bitcoins. The third halving occurred on May 11, 2020, when the block reward was cut from 12.5 bitcoins to 6.25 bitcoins.
So that is the history of Bitcoin Halving to date.
The next expected halving or the 4th Having event is expected to occur in May 2024, when the block reward will fall from 6.25 to 3.125 bitcoins.
Eventually, the block reward will reach zero, and no new bitcoins will be created. This is expected to happen in the year 2140.
Many Bitcoin traders and investors tend to look at various models to assess when to buy and sell their tokens. But the space, in spite of looking lucrative comes with enormous risks as is clear from periodic big Bitcoin Price crashes every few years. And one really needs to be careful about the BTC space and more specifically when dealing in cryptocurrency exchange like immediate connect. The security of the exchange as well as the ability to be able to take your tokens off the exchange is very important.
Bitcoin halving has a number of effects on the Bitcoin network.
- First, it reduces the inflation rate of Bitcoin. This makes Bitcoin scarcer and, therefore, more valuable.
- Second, it increases the difficulty of mining Bitcoin. This means that miners need to invest more computing power in order to mine new blocks.
- Third, it increases the competition among miners. This is because the reward for mining is cut in half, so miners are more likely to compete for the remaining rewards.
Fourth, it can lead to a short-term impact on the price of Bitcoin. At least this has been the case historically.
In the past, Bitcoin halvings have been followed by significant price rallies. The next Bitcoin halving is expected to take place in 2024 so there is no doubt a possibility that the halving will lead to another big impact on the prices. However, it is important to note that there is no guarantee that Bitcoin’s halving will always lead to an increase in price. The price of Bitcoin is affected by a variety of factors, including market sentiment, regulatory changes, and the overall state of the economy.
All said and done, if you look at the historical data, it may be tempting to view Bitcoin’s halvings as a catalyst for price-up moves. But it is not that simple. In fact, if you deep dive into the subject’s rabbit hole and really understand what the original Bitcoin Whitepaper has to say about this, you will realize that Bitcoin halving is a complex topic and sort of beyond the scope of this article/discussion. Just attributing previous price increases around Halving events only to the halving events grossly oversimplifies a very complex topic and factors and dynamics at play.
By design of Bitcoin architecture, the difficulty of mining Bitcoin will continue to increase with each Halving event in future and not just the one in 2024. Overall, Bitcoin halving is a significant event for Bitcoin enthusiasts and structurally, has a major impact on the Bitcoin network. But it is not the only factor one should be aware of when analyzing Bitcoin. So that was about the Bitcoin Halving of 2024.
Caution – Bitcoin and cryptocurrencies are unregulated. Past performance is not indicative of future performance. This article is for general information purposes only and is not intended to be and should not be taken as legal or investment advice.