Does the Bitcoin Halving Always Affect the Price?

BingX
6 min readFeb 21, 2024

There are two types of blockchain ecosystems in the crypto industry: proof-of-work and proof-of-stake networks. The proof-of-work blockchain is one of the first generations of blockchain and usually relies on mining activity to validate transactions. Any blockchain operating on the proof-of-work mechanism undergoes what is called halving every four years.

This prestigious event is coming up in 2024 for Bitcoin, and there are already questions about what it will likely look like. In this article, you will get answers to your questions regarding Bitcoin halving, how it works, how it affects mining, and everything else.

Overview of the Upcoming Bitcoin Halving in 2024

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The upcoming Bitcoin halving will be the fourth time this event has occurred since the creation of Bitcoin. The other three Bitcoin halving events gave an overview of what to expect from the one happening in 2024. But before diving into the other 3, you must note that the Bitcoin halving event automatically happens after four years and does not rely on any third party to activate it.

The first Bitcoin halving in 2012 was filled with confusion, as it was during the early days of Bitcoin, and people didn’t know what exactly to expect. Some believed that the price of Bitcoin might decrease due to the halving. On the other hand, some believed that the price of Bitcoin could shoot up due to the scarcity that the halving event will introduce. This halving happened on November 28, 2012, reducing the Bitcoin block reward from 50 to 25 BTC to reduce the number of new coins entering the network. This scarcity pushed the price of Bitcoin to increase by more than 8500%, from $12 to $1,032 in a year.

The second Bitcoin halving was on July 9, 2016, after the 420,000th block was mined. This halving event implied that the block reward was cut in half again, to 12.5 BTC. The third Bitcoin halving will happen four years later, on May 11, 2020, during COVID-19. There was a reduction in the block rewards from 12.5 to 6.25 at the 630,000th block.

Now, there’s another Bitcoin halving event in 2024, and there are high expectations of what might happen to Bitcoin and the broader crypto market. One of the things to expect is that the Bitcoin halving of 2024 might likely happen within April. Furthermore, the block reward for miners will be reduced by 50%, from 6.25 BTC to 3.125 BTC, and this will be after the 840,000th block is mined.

How Does Bitcoin Halving Work?

Bitcoin halving is an event that happens to the Bitcoin network every four years when the rewards for mining new blocks are reduced by 50%. In the Bitcoin ecosystem, some are known as miners, whose duty is to validate transactions in the network. For validating these transactions, they are given rewards in BTC. However, a halving event reduces these miners’ BTC rewards by half.

The occurrences of the Bitcoin halving event are automatic and happen after successfully validating 210,000 blocks. According to many experts, the Bitcoin halving event will continue until 2140. So, this is when the 32nd halving will occur, and Bitcoin might have reached its maximum supply by then.

Historical Price Movement After Bitcoin Halving Events

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Throughout the existence of Bitcoin, the historical price movements of the cryptocurrency have been quite massive. No wonder there are expectations of Bitcoin price reaching another all-time high after the 2024 halving occurs.

Starting from the first halving in 2012, the price of Bitcoin increased from $12 to $1,032, which was more than an 8,500% increase. Then, on the second halving in 2016, the price of Bitcoin increased from $651 to $20,089 526 days after the halving happened. This was quite massive; the third halving was even better as the price increased to $66,000 18 months after the halving in 2020.

Significance/ Expectations from Bitcoin Halving Events

The first expectations after the Bitcoin halving are mainly about the mining sector. The most noticeable significance or change is that mining rewards are reduced by about 50%. The implication is that the rate of new Bitcoin generation reduces significantly and lowers inflation for the apex cryptocurrency.

In the crypto market, there are huge expectations and hype around Bitcoin, and many investors often try to accumulate as much as possible for an expected price increase. Nevertheless, there might also be short-term price swings immediately after the halving.

Impact of Bitcoin Halving on Mining Economics

The fact remains that Bitcoin halving primarily affects BTC mining dynamics. Earning block rewards is one of the primary sources of income for miners, and they do this by validating transactions in the network. Another function of miners is that validating these transactions helps secure the network. However, mining profitability reduces when there’s a decrease in the block rewards. As the Bitcoin halving event of 2024 comes closer, there are also expectations that mining activity will drop due to the increasing cost of mining.

What Happens to Bitcoin Supply and Demand Dynamics After Halving?

Bitcoin supply and demand dynamics are seriously affected whenever there’s a halving event. For example, when Bitcoin halves, it reduces the amount of BTC going into the crypto market, which also affects the supply of the cryptocurrency. In other words, BTC tends to become more scarce during this period, increasing demand. Using a simple economics concept, the scarcity of an asset usually makes it more valuable. Hence, the price of Bitcoin tends to increase after each halving because the supply and demand dynamics are affected by the event.

Impact of Bitcoin halving on Network Security

One of the popular facts about Bitcoin is that its network operates using a proof-of-work blockchain. Hence, it heavily depends on the mining activities happening on the network to preserve decentralization by ensuring no single entity controls the network. With reduced block rewards due to the halving events, more miners are leaving mining activities. Apparently, if there’s a massive reduction in mining activities, it brings about centralization concerns.

Long-Term Outlook of Bitcoin Halving Events

The Bitcoin halving event is one of the major events that the crypto community looks forward to due to its significance in the industry. It happens every four years, and the success of this event could dictate the state of the crypto market for many years. There’s an interrelation between halving events and many other things in the Bitcoin and crypto ecosystem, such as miners’ incentives, historical price increases, and overall network security.

The long-term outlook of the Bitcoin halving event shows it will finally end sometime in 2140. At that stage, those validating transactions on the Bitcoin network will now depend on a fraction of the transaction fees as their incentives.

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BingX

Founded in 2018, BingX is a leading cryptocurrency exchange, serving over 5 million users.