Introduction
Bitcoin’s next halving event, expected in 2024, will be a pivotal moment for the world’s first and largest cryptocurrency. Here’s a comprehensive look at what bitcoin halving is, its historical significance, and what we might expect for the future price and supply of bitcoin.
What is Bitcoin Halving?
A bitcoin halving (or “halvening”) is a planned reduction in the reward miners receive for mining bitcoin. Halvings occur once every 210,000 blocks mined or approximately every 4 years.
When bitcoin first launched in 2009, miners received 50 bitcoin per block. The first halving took place on November 28, 2012, cutting the block reward to 25 bitcoin. The second halving occurred on July 9, 2016, further reducing it to 12.5 bitcoin. The latest halving took place on May 11, 2020, decreasing the reward to its current level of 6.25 bitcoin per block.
In 2024, the next halving is projected to occur in April. This will see the mining reward cut in half again to 3.125 bitcoin per block. Halvings will continue roughly every 4 years until around the year 2140, when the maximum supply of 21 million bitcoins will be reached and no more bitcoins will be created.
Why Do Bitcoin Halvings Occur?
Halvings are embedded within bitcoin’s code and are key to its scarcity. When originally designing bitcoin, Satoshi Nakamoto wanted new bitcoins to be released gradually into the market, while still having a finite supply. This contrasts with national currencies like the U.S. dollar that have an unlimited supply controlled by central banks.
The bitcoin blockchain follows precise mathematical rules that dictate the rate of bitcoin creation and when the supply will finally reach its 21 million maximum. Bitcoin’s source code determines that new bitcoins are generated by miners as a reward for validating transactions and creating new blocks. Halving events occur per bitcoin’s monetary policy to control the overall bitcoin supply by reducing the rate of new bitcoin released by miners over time.
Halvings prevent excessive inflation and instead promote steady organic growth for bitcoin. As halvings occur and inflation decreases, bitcoin becomes scarcer. Since there can only ever be a maximum of 21 million bitcoin, each bitcoin that exists becomes more valuable as more people use bitcoin and compete to own a finite supply.
Some key aspects of how halvings impact bitcoin’s supply:
The block reward amount decreases substantially with each halving. It started at 50 bitcoin, then declined to 25, 12.5, 6.25 and will reach 3.125 bitcoin after the next halving.
The rate of new bitcoins entering circulation is cut in half after each halving. Currently only 900 bitcoin are created per day versus 1800 before the 2020 halving
Halvings will continue approximately every 4 years until around 2140 when the maximum 21 million supply is projected to be reached. At that point, no more new Bitcoin can be created.
By strictly controlling the supply of new bitcoin entering the market, bitcoin’s creator aimed to slowly release new coins, while ensuring scarcity and giving bitcoin the potential to increase in value over time. Halvings are key events to help accomplish this.
History of Bitcoin Halvings
Let’s look back at Bitcoin’s three halvings to date, which have been momentous events for both the price and profitability of mining Bitcoin. Each halving has had notable impacts that give us perspective on what may happen in 2024 and beyond.
The First Bitcoin Halving — November 2012
The very first halving took place on November 28, 2012, when the block reward decreased from 50 to 25 bitcoin. Going from 50 to 25 bitcoins meant the rate of new bitcoins released each day was cut from 7,200 to 3,600.
At the time, not many people were mining Bitcoin or knew about this event. There was minimal mainstream public awareness or adoption. When the halving occurred the bitcoin price was around $12. By the end of 2013, bitcoin’s price had skyrocketed over 7000% to nearly $950.
Many speculate this meteoric rise was at least partially fueled by the decreased supply of new bitcoin from the halving. However, at the time there were also significant events like Silk Road adoption that likely contributed. Regardless, the first halving marked the transition of Bitcoin from an obscure crypto project into more mainstream recognition.
The Second Bitcoin Halving — July 2016
The second halving event happened on July 9, 2016. The 25 bitcoin block reward declined to 12.5 bitcoin, meaning only 1800 bitcoin were now generated each day versus 3600 previously.
By this time many more people participated in bitcoin mining and were anticipating the halving. The bitcoin price at the time was around $650. After the halving, bitcoin’s price steadily rose, reaching highs above $19,800 by December 2017. That’s an increase of over 2900% from the halving date.
With a more mature network and public awareness, the 2016 halving likely had a greater direct impact on bitcoin’s price rise. In addition to decreased supply, demand for bitcoin grew through 2016 and 2017, sending bitcoin’s price on a massive bull run over the next year. This cemented bitcoin’s potential as digital “digital gold” and a deflationary store of value.
The Third Bitcoin Halving — May 2020
Most recently, the third halving took place on May 11, 2020 decreasing the block reward from 12.5 to 6.25 bitcoin. Around 900 bitcoin are now generated per day, reduced from 1800 previously.
The bitcoin price in May 2020 was hovering around $8,600. As of November 2022, bitcoin’s price is around $16,800, representing a 95% increase since the 2020 halving.
For the 2020 halving, anticipation was high given the price rises seen after the previous two halvings. Speculation was rampant that the decreased new supply would send bitcoin’s price “to the moon” perpetuating this pattern.
The 95% price increase since the halving can be viewed as impressive given that bitcoin and the overall crypto market have gone through ups and downs including a major crash. Time will tell whether this bull run will continue. But following the 2020 halving so far, we have not seen parabolic 1000%+ gains like after previous halvings.
When is the Next Bitcoin Halving?
The next bitcoin halving is estimated to occur in March or April 2024, approximately 1315 days after the last halving. However, the exact date is still uncertain and depends on the rate of block production between now and the halving.
The halving takes place after 210,000 blocks have been mined from the time of the previous halving. Bitcoin’s code ensures a new block is mined approximately every 10 minutes. At that rate, it will take around 4 years or 209,999 more blocks before the next halving is triggered.
Most estimates have the halving occurring in April 2024 given expected block rates, which would make it 1412 days after the 2020 halving. However, if blocks are found at a slightly faster or slower pace than expected, the date could arrive sooner or later.
Once the blockchain hits the 210,000 block milestone, the mining reward subsidy will decrease from 6.25 bitcoin to 3.125 per block found.
How Might the 2024 Halving Impact Bitcoin’s Price?
One question the entire crypto community will be asking is how the 2024 halving will affect bitcoin’s price. Historical data shows a compelling relationship between past halvings and significant bitcoin price appreciation. Here are some key factors to consider:
Factors That Could Increase Price
Reduced new supply entering market — After the halving, daily bitcoin mined decreases from 900 to 450, reducing new inventory by 50%. With fewer new bitcoin coming into circulation but steady demand growth, an increase in price is likely needed to establish an equilibrium.
Increased scarcity — The halving will immediately increase the scarcity of bitcoin since less is being produced daily. Bitcoin’s stock-to-flow ratio will increase, indicating an asset that is increasingly scarce.
Halving hype-fueled buying — As we near the halving, hype and anticipation of price gains often leads to increased interest and speculation by investors, traders, and miners in advance, further driving up demand.
Renewed mainstream interest — News coverage of the halving may renew interest in bitcoin and crypto more broadly, bringing fresh capital and attention from investors.
Validation of previous price patterns — If history repeats and bitcoin’s price rises significantly, it can create a self-fulfilling validation of the “halving price pump” theory, motivating more buyers to acquire bitcoin.
Factors That Could Limit Price Increases
Bitcoin is more mature — Bitcoin now has a much larger $300B+ market capitalization compared to under $1B in 2012. Major institutional adoption has also occurred. As a result, the impact of reduced supply may be more marginal.
Other influences on price — Macro factors like stock market moves, regulation, and global economics can all heavily impact bitcoin’s price movements, perhaps muting the direct halving effect.
Miners may hold newly minted bitcoin — If miners hoard more newly minted bitcoin instead of selling, it could limit supply reductions.
Buy the rumor, sell the event — Bitcoin may rise into the halving, but then see selling activity after it occurs, similar to “buy the rumor, sell the news” price action.
Although a price increase seems likely based on historical data, it remains difficult to predict bitcoin’s price movements with certainty. The bitcoin market has matured rapidly since the previous halving, so another 1000% bull run is far from guaranteed. However, if past is prologue, bitcoin’s price may be poised for significant gains over the coming years.
How Will Miners be Impacted at the Next Halving?
For miners, bitcoin halvings can have significant effects on profitability and operations. Here’s what miners might expect with the next halving in 2024:
Revenue cut in half — The block reward decreasing from 6.25 to 3.125 BTC means miners’ revenue per block will be cut in half overnight. This is a major income reduction.
Increased operational costs — Since halvings occur periodically, they are predictable Events that miners can prepare for. However, many will need to update their equipment regularly to maintain efficiency and offset reduced block rewards through economies of scale. Upgrading gear like ASIC miners to stay competitive incurs major expenses. Electricity and overhead costs may also rise over time.
Consolidation of networks — The halving may force some smaller miners to shut down if mining is no longer profitable for them at the reduced block subsidy. However, larger mining farms and pools are likely to persist, contributing to centralization in mining power.
Dependence on transaction fees — With block rewards decreasing over time, a greater share of miner revenue will need to come from transaction fees attached to each transaction they verify. If network usage and fees grow to compensate, this can support mining economics.
While halvings are exciting events that bring renewed interest in bitcoin, they require major adaptations from miners. Those who can maintain low electricity and operating costs while capturing greater transaction fee revenue will remain competitive. Less efficient miners may need to shut down unless bitcoin’s price rises sufficiently to cover their increased expenses.
Overall though, halvings do force the bitcoin mining sector to become increasingly efficient over time as block rewards decline. Instead of relying on new supply, bitcoin’s security and sustainability will depend on a thriving network with robust transaction volume and fees to incentivize miners. The 2024 halving will bring the network one step closer to that future.
When is the Final Bitcoin Halving?
Given that halvings happen approximately every 4 years, they will continue to occur periodically until bitcoin’s maximum supply has been reached. Currently, around 19 million of the 21 million total bitcoin supply has been mined.
The final bitcoin halving is projected to take place around May 2036. This halving is expected to miner’s reward to drop from 1.5625 to 0.78125 bitcoin per block. After this point, no more halvings are possible since the block subsidy cannot go below 1 satoshi which is 0.00000001 bitcoin.
Once the maximum 21 million bitcoin supply has been mined, the bitcoin network will depend entirely on transaction fees to pay miners instead of the block reward. Luckily by design, bitcoin’s block size and transaction capacity will increase over time through technical improvements like the Lightning Network. This should allow bitcoin’s overall transaction fee revenue to support network security, even as the block subsidy ends.
By tapering and finally removing new bitcoin issuance, yet relying on ever-growing transaction volume, bitcoin’s creator aimed to develop a sustainable and robust economic system independent from centralized control. If bitcoin gains mass adoption, the final halving and end of bitcoin’s supply schedule will mark the successful transition toward this vision.
Conclusion
Bitcoin halvings are milestone events embedded within its design that underscore its core value proposition as “digital gold”. By reducing the bitcoin issuance rate and inflation schedule over time, bitcoin can increase in scarcity and value. As new supply entering the system is cut in half, demand has the potential to raise bitcoin’s price if past patterns hold.
Yet each halving also presents challenges, especially for miners who must grapple with rapidly decreasing block rewards and tightening profit margins. For the network to remain sustainable once the block subsidy runs out, both Bitcoin’s user base and its transaction volume must grow to support security through fees.
The next halving expected sometime around April 2024 will be widely anticipated throughout the crypto industry. Bitcoin has matured rapidly since its last halving, so the event may have somewhat less impact on price. However, if past halvings are a guide, bitcoin’s price is likely to surge over the next few years. Despite a more mature market, a halving-induced supply shock could still send positive price ripples throughout the ecosystem. Only time will tell whether the 2024 halving ushers in $BTC next bull run🚀.
