Impact on price
By assessing the price performance of three Bitcoin halving cycles over a two-year period starting one year before each halving and ending one year after it, one can get an idea of the Bitcoin price trajectory as the fourth halving approaches. Over such a two-year period in 2012, the growth of the Bitcoin rate was about 30,000%, in 2016 - 786%, and in 2020 - 712%. If Bitcoin performs as it has in the last two periods, its price could reach $220,000 in 2025. However, past performance does not guarantee future results, and many other factors influence the price of Bitcoin. Moreover, as Bitcoin develops and becomes more widespread, its price may become less volatile and more stable over time.
Another expectation from the halving is a reduction in price pressure due to sales, especially from miners. Miners are the most predictable sellers of Bitcoin, as they need to cover the cost of maintaining operations by converting new Bitcoins into fiat money. With each halving, structural selling pressure is reduced, and assuming demand remains constant or increases, the price should rise as a result.
Miner sales
Currently, the bulk of miners' income comes from the distribution of rewards for a found block of Bitcoin (newly mined Bitcoin), in which 6.25 BTC (about $187 thousand at the rate at the time of publication) is paid to miners approximately every 10 minutes. The annual issuance of new bitcoins creates about $9.8 billion, creating additional selling pressure that the market is forced to absorb every year.
Despite the fact that the number of new bitcoins mined in each block is halved, the total income of miners after each halving increased, which was due to the increase in the price of bitcoin. But once the number of new bitcoins mined per block approaches zero, miners will no longer be able to rely on rising prices to cover costs.
In addition to the newly minted bitcoins, miners also receive income in the form of transaction fees. It can be assumed that commissions should not increase, compensating miners for the declining income from issuing new bitcoins. Currently, transaction fees are only 2.6% of miners' income as a percentage of the total reward per block found.
This year there is an upward trend in transaction fees. This is largely due to the emergence and popularization of so-called ordinals or BRC20 tokens - an analogue of NFTs in the Bitcoin blockchain, which require space in the block. New experiments with layer 2 technologies such as the Lightning payment network or the Stacks smart contract platform could further increase the load on the blockchain.
Judging by historical data, it was profitable to invest in Bitcoin before the halving. However, since the reduction in coin supply has less of an impact on the relative selling pressure compared to daily trading volume, halving events may be less significant in the future.
If transaction fees do not increase significantly, or miners are unable to find alternative sources of income, the long-term viability of Bitcoin may be in question, and subsequent halvings will put additional pressure on miners.
Halving is one of the most important events in the history and evolution of Bitcoin. It demonstrates the unique features of Bitcoin as a decentralized, non-inflationary and transparent form of money that is governed by code. Depending on how the network reacts to this event, the next halving will either further cement Bitcoin as the leading cryptocurrency, or pave the way for new potential cryptocurrency networks that could knock it off its pedestal.