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July 06, 2023

Bitcoin Halving 2024: What Might This Mean For Bitcoin?

Bitcoin Halving
Katya Richardson

Written by Katya Richardson

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Introduction

Bitcoin is infamous for its wild price swings, which may quickly reverse and wipe out millions of dollars worth of value in a matter of minutes. Given the lack of foundations or connections to the real economy in the case of the digital currency, those movements are frequently a mystery to market observers.

One of the crucial events in the Bitcoin network is known as Bitcoin halving. As we approach the next Bitcoin halving, it’s crucial to understand what it is and how it could potentially impact the world’s most prominent digital currency. Bitcoin halving is a pivotal event that happens every four years, in a Bitcoin network. So far there have been three halving events already, the first event occurred in November 2012, the second event was in July 2016, and the most recent halving was in May 2020.

So this means less than one year away we should be anticipating that Bitcoin halving will take place in 2024 for the fourth time.

What is Bitcoin Halving?

Bitcoin halving is a term that is used for a reward that is cut by half from Bitcoin mining transactions, resulting in miners receiving 50% fewer bitcoins for verifying transactions. The reward given to miners is in the form of Bitcoin, the amount of which depends on their ability to solve complex mathematical problems and add transactions to the blockchain.
  • In 2009, the reward that was given to the miners was 50 bitcoins for each block in the chain mined;
  • The second halving occurred in July 2016 where the mining reward was 12.5 per block, and;
  • It became 6.25 bitcoins per block as of May 11 2020, with each block that is produced every 10 minutes.
Reducing mining rewards slows the rate at which new bitcoins enter circulation, making them more scarce and valuable. As the mining reward reduces, the cost of mining Bitcoin increases, making it more challenging to earn Bitcoin. Backers of the cryptocurrency argue that this can contribute to an increase in its value by making Bitcoin scarcer. That’s why Bitcoin halving or known as “the halvening” is an event that is eagerly anticipated by people in the Bitcoin network.
Bitcoin on fire

Why Does Bitcoin Halve?

The motivations behind the halving have never been formally stated by Nakamoto as The creator of Bitcoin. But there is a lot of speculation that said, One of the reasons why Bitcoin is considered a store of value, similar to gold rather than fiat currency, is its halving mechanism that plays a crucial role in regulating the supply of new Bitcoins.

By reducing the rate at which new coins are added to the market, halving helps to maintain the scarcity of Bitcoin, which contributes to its perceived value. This makes Bitcoin a more attractive investment option for those who seek stability and predictability, as its supply is subject to a predetermined and controlled schedule, unlike fiat currency which is subject to inflationary pressures and other external factors.

Halving is sometimes considered a signal to prompt buying, as it implies that a reduction in the growth rate may result in an increase in the value of Bitcoin. This perception underlines the significance of halving in maintaining the stability and sustainability of the Bitcoin network.

What Happened Last Time Bitcoin Halved?

Looking back at earlier halving occurrences and their effects on Bitcoin’s price and popularity is key to comprehending the probable ramifications of the 2024 halving event.

Bitcoin halvings Source: @bitharington on Twitter.com

As we can see from the data above, Bit Harington plotted the price of Bitcoin on a logarithmic scale, marking points for 1 year before, the halving itself, and the post-halving top.

On the 28th of November, 2012, the block reward was first halved, dropping from 50 Bitcoin to 25 Bitcoin.

  • The price 1 year before was $2.
  • At the time of the halving was $12,35.
  • The price point reached its highest point in January 2014, around $1,000.

In July 2016, the second event, the block reward dropped from 25 BTC to 12.5 BTC.

  • The price 1 year before was $270.
  • At the time of the halving was $650.
  • The price point reached its highest point in December 2017, around $19,800.

In May 2020, the third event, the block reward dropped from 12.5 BTC to 6.25 BTC.

  • The price one year before was $8,500.
  • At the time of the halving was $9,756.
  • The price point reached its highest point in November 2022, around $69,000.

In all these three events, the price went higher approximately 1 year after. Even though it shows how volatile Bitcoin’s short-term price changes may be, the halving mechanism is an essential part of the cryptocurrency’s architecture.

Considering the potential impact of Bitcoin halving on your investments? Gain insight into how these changes interact with the legal aspects of cryptocurrency in Australia by exploring our article: Is Cryptocurrency Legal in Australia?.

Are You Holding Bitcoin? What Might This Mean For You?

Bitcoin halving has significantly impacted the price of Bitcoin. The value of each coin awarded is thought to increase as the network developed, hence block rewards are set up to halve every so often. But instead of utilizing Bitcoin as a medium of trade, this might encourage consumers to hold it as a speculative asset. This event cannot be doubted that it will boost the price of bitcoin, as stated above that the last halving event was boosting the bitcoin prices.

Although there are many other factors that affect the price of bitcoin, a report from Bitcoin.org tells “The price of a Bitcoin can unpredictably increase or decrease over a short period of time due to its young economy, novel nature, and sometimes illiquid markets”, but it does seem that halving events are often bullish ones for the cryptocurrency after initial volatility eases. Baker advises investors to exercise caution in light of the upcoming Bitcoin halving. Reduced mining activity may result in a price plateau even if scarcity can raise prices. The next Bitcoin halving is expected to occur in 2024, As of 16.00 p.m. on July 06, 2023, there are around 295 days left to the next Bitcoin halving Source: Bitcoin Halving Countdown.

For Australian readers planning their long-term cryptocurrency investment strategies post-halving, our comprehensive guide How to Invest in Cryptocurrency Australia offers valuable insights.

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