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The Bitcoin Halving is a landmark event in the crypto calendar and describes the 50% reduction in new Bitcoin issuance that occurs roughly every four years. Given that Bitcoin is a fixed-supply asset with a maximum supply of 21M, the halving of new issuance is seen as a major monetary event and has a number of implications.
Bitcoin follows a fixed issuance schedule, and part of its attraction is its predetermined monetary policy. A fixed amount of Bitcoin is distributed every year to successful miners per successfully validated block. This is called a block reward and represents the incentive to secure and validate the Bitcoin blockchain (i.e., mine). Every 210,000 blocks, the block reward is halved, i.e., the Halving.
While Bitcoin has continued to rise in price since the inaugural Halving, there is more to the story. Each Halving has been historically different. The Halving is itself not the primary catalyst for Bitcoin outperformance; other macroeconomic and crypto-native factors are key too.
Hashrate is a key security metric for the Bitcoin blockchain and describes the total computational power being provided to secure the network. The Halving directly halves the majority of most miners’ revenue, which may have a significant impact on smaller miners, potentially impacting Bitcoin’s hashrate. However, data shows that this move is historically temporary, and over 70% of Bitcoin’s hashrate has been introduced through the crypto winter of 2022, when the price of Bitcoin was much lower.
The Halving tends to have a “survival-of-the-fittest” effect on the Bitcoin mining industry, which is likely to see a level of M&A and consolidation as smaller firms potentially struggle with lower revenues. Many will seek to find diversified sources of revenue, while others will seek to diversify geographically.
Perhaps the most important effect of the Halving is its role in serving as a global advertisement for Bitcoin and its inflation-resistant, self-enforced monetary policy.
Compared to previous Halvings, 2024 is different in that we have US$12B+ of U.S. spot BTC ETF inflows, the highest rate environment for 20+ years, as well as the fact that ~94% of Bitcoin has already been mined.
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