Bitcoin halving: what it means and when it will happen
Bitcoin cryptocurrency that works over fourteen yearsis programmed in such a way that the number of digital coins is pre-limited and capped at 21 million.
These are released into circulation gradually, while the rate of addition of new bitcoins gradually decreases. Every four years, the number of virtual coins generated daily is halved. Before May 2024 (the exact date of the halving counted down here) was set at 900 bitcoins per day, after the halving at 450.
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The annual inflation of the number of digital coins thus decreases from 1.7 percent to 0.8 percent. Of the total intended amount of 21 million bitcoins, more than 19 million have already been generated. The key context of the whole event called the halving is thus the increasing rarity of the pioneering cryptocurrency.
Bitcoin halving and exchange rate: 2024 and 2025 predictions
The event is highly anticipated among Bitcoin holders considering the potential increase in the value of the cryptocurrency. The appreciation of the Bitcoin rate is slightly less explosive after each halving than the previous ones. But optimists believe that Bitcoin could surpass its historical maximum (less than $70,000 in 2021) and attack the limit of hundreds of thousands of dollars for one virtual coin, or even significantly surpass it.
However, in the world of virtual currencies, it is rarely worthwhile to predict the exact price due to the huge dynamism of the industry. What is certain, however, is that the industry’s leading companies are preparing for a new growth cycle.
“Our projection is for a price peak in 2025 with the bull market starting sometime around the halving in 2024. I would add a few aspects to that. First: yes, they are just projections. No one knows for sure how things will turn out. I certainly wouldn’t want to sound like a preacher who proclaims that something is 100% going to happen. Until now, however, Bitcoin has always moved in cycles. The second aspect: of course we also perceive macroeconomic uncertainty and local events such as the collapse of the SVB, and for our business banking crises are simply interesting. I won’t say no, although I don’t wish anything bad on anyone and I don’t want people to lose money in failing banks,” Matěj Žák, head of hardware wallet manufacturer Trezor, described in an interview for E15.
If there really was a massive increase in the price of Bitcoin, the exchange rate of other cryptocurrencies, whose price is closely correlated with the exchange rate of Bitcoin, would probably also increase.
Bitcoin price after past halvings
Cryptocurrency advocates derive their optimism from previous halving events. So far, it has always been followed by a sharp rise in the value of Bitcoin and reaching new highs. So far, it has been the case that with each new four-year cycle, price records have also been broken. And quite significant.
“But the market is maturing. Related to this is the lower expected multiplier effect, meaning that the jump from a bear market to a bull market is no longer as pronounced as it used to be. The long-term growth curve of Bitcoin and the business around it seems to be leveling off. But it’s still going up. Of course, only the future will show whether this will continue to be the case,” added Žák.
Bitcoin price in the context of the halving (halving date marked in blue):
#BTC is very well-positioned for mid- to long-term upside
It would be a shame to miss out on the exponential post $BTC Halving gains#Crypto #Bitcoin pic.twitter.com/FE1j3nCTmN
— Rekt Capital (@rektcapital) April 9, 2023
Bitcoin Halving and Impact on Cryptocurrency Miners
But the halving also represents a specific challenge for everyone who tries to earn money by mining this virtual currency. The reduction in the number of bitcoins that miners can come up with means, among other things, that mining may not theoretically pay as much as it used to.
Assuming, of course, that the value of Bitcoin does not jump immediately in May 2024. For example, after the halving in 2016, however, the parabolic growth of the price of Bitcoin did not occur until about a year and a half after the event itself. A short-term price drop cannot be ruled out either.
| Datum paralysis | Bitcoin price on halving day | Bitcoin price one year after halving |
|---|---|---|
| November 28, 2012 | 12,35 USD | 1 100 USD |
| July 9, 2016 | 657,63 USD | 2 570,88 USD |
| May 11, 2020 | 8 558,18 USD | 57 546,62 USD |
However, not much changes from the practical operation of mining. Every ten minutes, the owner of the computer hardware that managed to be the first to solve a primitive computing task is entitled to a reward.
The activity of miners keeps the Bitcoin network running and safe from cyber attacks. However, the reward amount was reduced from 12.5 Bitcoin to 6.25 in May 2020. Another halving will occur in spring 2024.
| Datum paralysis | Block reward reduction |
|---|---|
| November 28, 2012 | 50 BTC → 25 BTC |
| July 9, 2016 | 25 BTC → 12.5 BTC |
| May 11, 2020 | 12.5 BTC → 6.25 BTC |
| Around May 2024 | 6.25 BTC → 3.125 BTC |
If a large number of miners were no longer profitable and quit, it would also have a negative impact on the security of Bitcoin. This would spin a spiral of mistrust towards the most widespread virtual currency, which would only strengthen a possible price drop. However, this is a black scenario, and in practice only of a temporary nature.
Bitcoin’s algorithm adjusts the mining difficulty every 14 days to match the changing market situation. From a practical point of view, the owner of the mining machine can turn off his equipment and wait for the automatic reduction of power requirements and then start the mining machines again.
Bitcoin halving and taming optimism: what to watch out for
No cryptocurrency investor should generally take bitcoin and co. as a guaranteed profitable investment and the same is the case with the halving bet. Although bold predictions of high profits are spreading in the community of cryptocurrency holders, it is also necessary to exercise caution and tame the vision of fabulous earnings.
The halving has only happened three times in the past, and in the investment world it is generally true that past returns are no guarantee of future returns. At the same time, however, there was never a halving during the hawkish approach of central banks. Bitcoin and other cryptocurrencies were born in an era of extremely loose monetary policy, which further helped fuel their growth as risky assets in the eyes of traditional investors. Although bitcoin holders profile the virtual currency as digital gold, among traditional investors the digital coin still has a reputation as a high-risk asset that speculators are willing to dump in times of market turbulence.
Some investors in cryptocurrency, for example, the co-founder of the exchange BitMex Arthur Hayes, however, believes the Fed’s hawkish approach will not last long.
After the post-pandemic flooding of the markets with cash, the West can only pretend to fight inflation. A truly drastic increase in interest rates would torpedo its economy and make its debts unbearably expensive. This applies to both the United States and the European Union, he wrote Hayes shortly after the Russian invasion of Ukraine. That is, long before some banks such as Silicon Valley Bank or Credit Suisse began to have financial problems.
