How Will Bitcoin Halving in 2024 Affect Price? Lessons from the Past Events.

TLDR:

Bitcoin price action shows that each halving event has historically been correlated with a four-year cycle in the price of Bitcoin.

The pattern of rallies, pullbacks, and blow-off peaks that occurred prior to and during the halving has been very consistent.

This approach can be used to forecast the price of Bitcoin, assuming that historical tendencies continue, even though past success does not guarantee future outcomes.

Bitcoin Halving Effect on Price

The frequency of Bitcoin halving events has been connected to a large percentage of the price swings of the cryptocurrency throughout its history. Although there is still disagreement on the impact of halving on the price of Bitcoin, it is clear that each cycle has followed a similar pattern to the ones that came before it.

It’s critical to understand that factors other than price determine Bitcoin. The value of Bitcoin can be impacted by a wide range of macroeconomic factors, including as changes in the money supply, interest rates, geopolitical events, and general market mood.

It is difficult to establish a clear cause-and-effect relationship between Bitcoin’s price and halving events, or any other unique element for that matter. But we may make educated guesses because of the reliable historical correlation and our grasp of the network’s dynamics.

Past Halvings vs Bitcoin Price

A Bitcoin halving primarily results in a decrease in the mining reward. The payouts to Bitcoin miners that successfully mine a new block are divided in half. Therefore, the quantity of newly generated bitcoins that are put into use is halved. The rate at which new bitcoins are created falls as the block reward is lowered by 50%. The coin experiences less inflation as a result of its slower supply expansion.

With each halving, the network steadily gets closer to this maximum supply. Miners will no longer earn block rewards in the form of freshly created Bitcoins once the maximum quantity is achieved; instead, transaction fees will serve as the main source of miner incentives.

The laws of supply and demand largely control the main effects of the Bitcoin halving on pricing. As fewer Bitcoins are being issued, prices are expected to rise, assuming that demand either stays the same or increases. Additionally, the quantity of Bitcoin that miners can sell to cover operating expenses has decreased, which lessens the pressure on sellers in the market.

The upcoming halving may have an even more substantial impact on the price of Bitcoin because of the possibility that demand will rise in tandem with a fall in supply due to important advancements in the industry.

To understand this better, let’s take a look at Bitcoin’s price action during the previous halving events:

First Halving: November 28, 2012

Bitcoin’s price skyrocketed from $12 to $1,032 (more than 8,500%) in less than a year after the November 28, 2012, halving, which decreased the Bitcoin block reward from 50 to 25 BTC. A number of factors, including rising acceptance of Bitcoin as a legitimate form of currency, increased demand from investors and speculators, and the feeling of scarcity following the halving event, contributed to this notable surge in value. Further contributing to the rise in value was the fact that fewer Bitcoins were being minted as a result of the lower block reward. By this time, 210,000 blocks had been mined, and half of the 10.5 million Bitcoins in circulation had been distributed.

Before the initial halving event, Bitcoin remained obscure, known primarily to cypherpunks involved in its early development. However, when its value surged to over $1,000, Bitcoin started gaining attention in mainstream media. Despite this, the emerging asset class was generally dismissed by those outside the community.

As the price plummeted back to around $200 in 2015, sceptics declared that the bubble had burst, and Bitcoin was deemed obsolete. Interestingly, this scepticism has persisted throughout subsequent market cycles.

Second Halving: July 16, 2016

The timing of this second halving was anxiously awaited by the cryptocurrency community. Prior to the July 9 halving date, there was a brief price spike in Bitcoin’s price as it gained acceptability and appeal among investors. Upon mining the 420,000th block, the Bitcoin block reward was once again halved, to 12.5 BTC. At the time, Bitcoin was trading at $650. Shortly after the halving, Bitcoin price fell but soon after it had an unprecedented surge that saw its price skyrocket to an all-time high of $20,089, 526 days after the halving.

Third Halving: May 11, 2020

The third halving took place amidst various uncertainties, notably the repercussions of the COVID-19 crisis, which led to a crash in Bitcoin’s price in March. Despite these challenges, Bitcoin has demonstrated remarkable resilience, experiencing an upward trajectory.

On May 11, the block reward halved from 12.5 to 6.25 BTC at the 630,000th block, with Bitcoin trading around $8,787 per BTC at that time. Over the following 18 months, Bitcoin surged to a peak of approximately $69,000.

Predictions for Fourth Halving 2024

The upcoming halving is anticipated around April 13, 2024, at block 840,000, where block rewards will be halved to 3.125 BTC.

Our predictions are based on the historical performance of bitcoin price before, during and after the halving event. All the previous three cycles—which can be described as highly simplified yet accurate—saw a similar effect of the Bitcoin price halving, with a pattern that included a significant rally prior to the halving, a brief correction and period of consolidation before the major bull run and blow-off top, with the peak occurring approximately 18 months after the halving. As we edge closer to the event, many believe the market is in the “pre-halving rally” stage of the cycle and we are set for a post-halving price rally.

Some industry experts and reputable insiders have shared their predictions with most of their predictions placing the value of Bitcoin over $100k in the upcoming post-halving rally. Here are examples of what some veterans think: 

According to CoinCodex, the price of Bitcoin is expected to peak above $170,000 in August 2025 and then retreat to levels around $95,000–$100,000.

BitQuant predicts that at some point during the pre-halving rally, there will be a new all-time high, with prices surpassing $250,000 at the post-halving peak.

According to Gemini’s Marshall Beard, the market will reach a new peak of roughly $100,000 once it surpasses its previous high of $69,000. 

Conclusion

The 2024 Halving is quite unique, in that, it has coincided with the approval of Spot Bitcoin ETF that has triggered a pre-halving rally due to an influx of capital from institutional investors. As such, the cryptocurrency has set the bar high already in the weeks leading up to the halving. If the asset follows a similar cycle to the previous halvings then we are in for a huge upward ride.

With that said, it is important to note that a variety of factors influence market dynamics, and price swings can be complex. Based on a review of the previous three halving events, a significant price increase usually starts between six and twelve months later.

Furthermore, prior to a halving, the price of Bitcoin frequently rises as traders anticipate a possible increase in value after the event. However, since the conditions pertaining to each event are unique, it is difficult to predict with certainty whether prices will rise at the next halving.

Simply put, buckle up and enjoy the ride. 

Image courtesy of Flickr

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