Bitcoin Halving 2024: What You Need to Know

Bitcoin (BTC) halving is one of the most anticipated events on the Bitcoin network. This event takes place when the supply of new Bitcoins is cut in half. The idea of this event is to subside the rate of inflation, which in return would create upward pressure on the value of Bitcoin.

Bitcoin halving is often scheduled at a four-years interval, after every 210,000 blocks. Prior to the time of writing, three Bitcoin halvings have already taken place. The first one happened in 2012, it was followed by the second one in 2016. Hence, the last Bitcoin halving happened in 2020. The last halving saw Bitcoin miners being awarded 6.25 Bitcoins for each block they successfully mined till date.

The next halving will occur in 2024, when the block reward will fall to 3.125. Investors within the space are already anticipating the next Bitcoin halving event. It is believed that the impact of each halving will diminish as the block reward approaches zero.

Bitcoin Halving Defined

Bitcoin halving can be described as the event that sees to the scheduling of the Bitcoin block reward subsidy. In accordance with the Bitcoin blockchain protocol, the event sees Bitcoin block reward being cut in half every 210,000.

As said earlier, Bitcoin halving occurs after every 210,000 blocks are mined, or roughly every four years, hence the block reward given to Bitcoin miners for processing transactions is cut in half. The event specifically cuts in half the rate at which new Bitcoins are released into circulation. This is recognized as the way at which the network enforces synthetic price inflation until all Bitcoins are released.

This rewards system will continue until many years to come as the halving event is expected to stop when the proposed limit of 21 million is reached. At that point, miners will be rewarded with fees, which network users will pay, for processing transactions. These fees ensure that miners still have the incentive to mine and keep the network going.

In 2009, the reward for each block in the chain mined was 50 Bitcoins. After the first halving, it was 25, and then 12.5, and then it became 6.25 Bitcoins per block as of May 11, 2020. To put this in another context, imagine if the amount of gold mined out of the Earth was cut in half every four years. If gold’s value is based on its scarcity, then a “halving” of gold output every four years would theoretically drive its price higher.

Why Is BTC Halving Important?

The halving event is very expedient and significant because it marks another drop in the rate of new Bitcoins being produced as it approaches its finite supply. The total maximum supply of Bitcoins is 21 million. It is interesting to note that there are about 18.85 million bitcoins already in circulation as of October 2021, leaving just around 2.15 million left to be released via mining rewards.

The halving event introduces some notable changes every time it occurs to basically increase the growth and efficiency of the network. At every Bitcoin halving, mining reward is halved. This leads to a significant slump in the rate of inflation. Furthermore, the event causes a reduced available supply followed by an impressive increase in demand and the price of the coin. Miners are less bothered about the reduction in compensation often caused by the halving event as it guarantees a significant spike in the value of Bitcoin as the process prevails.

It has been observed that lower supply with steady demand usually results in higher prices. Thus, since the halving reduces the supply of new Bitcoins, and demand usually remains steady, the halving has usually preceded some of Bitcoin’s largest runs.

Previous BTC Halvings

The previous Bitcoin halvings took place in 2012, 2016 and 2020 respectively.

• 2012 Bitcoin halving. As explained earlier, the 2012 Bitcoin halving was the first halving in the history of Bitcoin blockchain. The event happened on November 28, 2012. The halving block was mined on SlushPool by someone using a Radeon HD 5800 miner. Notably, the new BTC per block before the 2012 block halving was 50 BTC. Hence, the new BTC per block was halved to 25 BTC per block after the 2012 block halving. As at the day the halving took place, BTC was priced at $12.35. Analysis revealed that this price skyrocketed to $127.00 in about 150 days.
• 2016 Bitcoin halving. The next halving took place on July 9, 2016. After the event, the new BTC per block was divided into two and became 12.5 BTC per block. Notably, the price on the halving day was $650.63, in about 150 days later, it had spiked to $758.81.
• 2020 Bitcoin halving. May 11, 2020 saw the third bitcoin halving happen. The new BTC per block before the event was 12.5 BTC per block. This was halved to 6.25 BTC per block after the event. As usual, the event saw a notable spike in the price of bitcoin as the price of BTC as of the halving day was $8821.42, this price increased to $10,943.00 in about 150 days later.

Bitcoin Halving 2024: What to Expect

If the past trend continues, we have probably reached the post halving 1-year run-up (from the 2020 halving) at the beginning of 2022 and the all-time high that will be seen before the next 2024 halving.

Bitcoiners appear to be curious if the 2024 halving will lead to a massive run-up after it comes or if a runup will begin before the halving with investors wanting to take advantage of the expected runup pattern.  What may eventually happen is that there is a smoothing of the entire pattern.

Looking at the historical returns, it seems that the huge gains are lessening with each halving, and this smoothing might be the result.  Only time will tell, and the time to watch for is prior to the coming March 2024 halving.

Conclusion

One of the most important things to note concerning the Bitcoin halving event is that it helps the network to control the supply of coins in circulation, thereby increasing its value in the market. As mentioned earlier, the rewards system is expected to continue until over 100 years to come, when the proposed 21 million limit for Bitcoin is reached. Afterwards, miners will be rewarded with fees to process transactions.