Halving Bitcoin 2024
Every 4 years, the reward to miners for a mined bitcoin block is halved. Over the last 14 years of the Bitcoin protocol, the reward has decreased 8 times and will split further in 2024. Investors and analysts expect Bitcoin's exchange rate to hit an all-time high after the next halving.
What is Bitcoin halving?
Bitcoin was the world's first cryptocurrency, launched in 2009, and at the same time, the first protocol to introduce a deflationary mechanism for generating BTC coins called "halving".
Halving is an inflation control mechanism that halves the reward to miners for a mined block at a set frequency. This mechanism works either until the maximum emission is reached, as in the case of Bitcoin, or until the reward is almost zero.
Bitcoin is not the only decentralized protocol using halving. In addition to Bitcoin, halving and similar mechanisms are present in the networks of:
However, halving works differently on each network. For example, in the Bitcoin protocol, halving occurs every 210,000 blocks mined, while in Litecoin, it happens every 840,000 blocks. Although the frequency remains about the same, the speed of mining blocks in the Litecoin network is 4 times faster compared to Bitcoin.
Previous Bitcoin halving dates
The first Bitcoin halving took place on 28 November 2012: at that time, the reward for miners per mined block was reduced from 50 to 25 BTC for the first time. At that time, the price of Bitcoin varied around $12.5, but after the event, it began to rise rapidly. Less than six months after the first halving, the BTC rate exceeded $100 for the first time, and in February 2013, it reached a new high of $915, according to CoinMarketCap.
The next halving occurred on 9 July 2016, after which the block reward decreased from 25 to 12.5 BTC. Immediately after the second halving, the BTC exchange rate fell from $650 to $561 but soon resumed growth and reached another all-time high in December 2017, after which a long period of "cryptowinter" began again.
The third halving, which reduced the reward from 12.5 to 6.25 BTC, occurred on 11 May 2020, when Bitcoin traded at just under $10,000. The BTC exchange rate dropped to $9,000 and began to conquer new highs again, reaching $63,000 in April 2021 and nearly $69,000 in November.
Since then, the price of the first cryptocurrency has been falling all the way down to $16,145 in November 2022 and has risen since the beginning of 2023 to $43,500 as of 5 November that year, ahead of another halving. However, this is not the only likely reason for the rise, as investors are optimistic about the SEC's approval of spot Bitcoin ETF applications from BlackRock and other investment funds.
According to blockchain observers, the following fourth halving is expected in April 2024 at a block height 840,000. This will reduce the block reward to 3.125 BTC. As of November 2023, just over 20,000 blocks remain until the next halving. Many analysts predict that the bitcoin exchange rate will renew its high and rise above $100,000, but this depends on various factors affecting demand.
Does halving affect the bitcoin exchange rate?
Historically, after another halving, the first cryptocurrency's exchange rate updates its maximum. With each halving, the rate at which new coins are generated is significantly reduced, and Bitcoin becomes more limited and, therefore, a more valuable asset.
In addition, after the reduction of rewards, the profitability of mining sharply decreases. At the same price, it becomes practically unprofitable to mine half as much cryptocurrency if we do not consider the commission income. At the same time, the number of new coins entering the market after the reduction of rewards is reduced, which means that miners sell fewer bitcoins, reducing the pressure on the price of BTC.
Other on-chain metrics also point to growing demand. For example, in 2023, the number of addresses with a balance of at least 1 BTC, according to Glassnode, exceeded 1 million, and the number of Bitcoin wallets with more than $1 million in bitcoins tripled.
All these factors, combined with positive investor expectations, may trigger a new wave of growth, which is confirmed by the historical data of bitcoin quotes.
However, it is impossible to say how Bitcoin will behave shortly before and sometime after the halving, as much depends on miners and key indicators of the Bitcoin network, such as complexity and hash rate.
The price of cryptocurrency tends to decline sometime before halving due to uncertainty. If the reward is reduced against increasing hash rate and network complexity, some miners may "capitulate" and sell off their assets, which raises concerns among investors. Additional pressure may be exerted by traders who opened short positions in anticipation of a localized drop in the bitcoin rate.
The new growth stage usually starts a few months after the halving. The upcoming halving can be tracked using OKLink services and the Bitcoin Halving Clock, which displays the countdown as an analogue clock.
