Bitcoin Halving: Impact on the Crypto Market

Bitcoin Halving: Impact on the Crypto Market

Marcin Woźniak February 10, 2023
6 min read

Welcome to our in-depth analysis of the Bitcoin Halving and its impact on the cryptocurrency market. As a key event in the world of digital assets, understanding the dynamics of the Bitcoin Halving dates is crucial for investors.

In this article, we will provide a comprehensive examination of the underlying principles of this event, its historical implications, and the potential effects on the broader market landscape. Join us as we explore the significance of the Bitcoin Halving and how it may shape the future of cryptocurrency investments.

Takeaways:

  • The next Bitcoin halving: April 2024
  • Halving historical data predicts bitcoin price rise
  • Halving the price of bitcoin is not the only factor behind bitcoin’s recent price increases

bitcoin halving rewards bar chart

What is bitcoin halving?

Bitcoin halving occurs approximately every four years or in every 210,000 blocks have been mined, in which the reward for mining new Bitcoin blocks is reduced by 50%. This event is built into the Bitcoin protocol as a way to manage the total supply of Bitcoin and control inflation.

Let’s examine how does bitcoin halving work as part of the blockchain network

Initially, when Bitcoin was created, the bitcoin block reward was set at 50 Bitcoins per block. After the first bitcoin halving in 2012, the bitcoin block rewards were reduced to 25 Bitcoins per block, followed by a reduction to 12.5 BTC in the 2016 bitcoin halving, and most recently to 6.25 BTC per block after the 2020 halving.

The bitcoin halving process will continue until the total supply of 21 million Bitcoins is reached, which is expected to occur around the year 2140.

The Bitcoin halving is an important event for the cryptocurrency market because it directly affects the rate at which new coins are introduced into circulation, influencing the overall supply and demand dynamics. This event often leads to speculations and predictions about the potential impact on Bitcoin’s price, as well as the broader market sentiment.

Factor to increase bitcoin’s price?

Many bitcoin aficionados are hoping that the halving, or fragmentation, of the reward for a mined bitcoin block, will lead to a price hike in 2020.

Difficulty

The difficulty of bitcoin mining

In the context of bitcoin mining and remining, another concept is important: difficulty. It defines how difficult it is to find a hash below a certain value or a hash with a certain number of zeros in front of it. The supply of new hash is represented in hexadecimal notation or as a sequence of numbers and letters. They look like the following:

00000000000000000000000001337b122b064e0a01f26b83c32107h3f5bsf64b352343

Although there are letters in this sequence, this corresponds to the hexadecimal notation of a number or hash. It is linked to the block and can therefore be identified by bitcoin miners as a legitimate block in the blockchain. Miners must find this hash using their calculations. To achieve this, they must:

  • 1. Short the previous block ….
  • 2. Hash the transaction of the block they wish to add and combine it with any number, which eventually gives the desired hash.

To do this, try billions of random numbers per second (!) until you find the correct hash.

Adjust the difficulty

Now to the last element, the Difficulty Corrections, one of the biggest advantages of the Bitcoin system. These corrections, made every 2016 blocks, guarantee a block time of 10 minutes. At this rate, new blocks are created. This is what leads to price elasticity. Its level in the Bitcoin network is kept as low as for any other asset in the world.

Let us look at the most popular comparative object: the precious metal of gold. As the price of gold rises, more investment is expected from mining companies, which mine more of the precious metal to meet the increased demand.

However, this also increases the overall supply. Price elasticity describes the percentage change in supply when the price of an asset increases by 1%. This is different in the case of bitcoin. By adjusting the difficulty, the reward remains the same, even if the number of miners increases. Currently 6.25 bitcoins per ten minutes, although in the early days of bitcoin there were many more.

Bitcoin issuance is down by half

The effects of bitcoin halving

Bitcoin halving, a phenomenon that occurs roughly every four years (every 210,000 blocks), simply halves the number of bitcoins a miner receives for each new block.

Until 2012 it was 50 BTC per block, after 28 November 2012 it was only 25 BTC and in July 2016 only 12.5 BTC. The next bitcoin halving was in 2020, supply decreased to 6.25.

The next bitcoin halving event will occur in 2024. After this date, the reward will be 3.125 BTC/block. This fragmentation logically changes the annual growth of the total supply:

Phase

Period Block reward Annual growth Daily increase
1 2009 – 2012 50 BTC 2.625,000 BTC ~7,200 BTC
2 2012 – 2016 25 BTC 1.312,500 BTC ~3,600 BTC
3 2016 – 2020 12.5 BTC 656.250 BTC ~1,800 BTC
4 2020 – 2024 6.25 BTC 328.125 BTC ~900 BTC
5 2024 – 2028 3.125 BTC 164.062 BTC ~450 BTC

History: the first two bitcoin halvings

Bitcoin halving graph

The first bitcoin halving

The first Bitcoin halving, which reduced the block reward to 25 BTC per block, occurred on November 28, 2012. Notably, a year prior to this event, beginning in November 2011, the Bitcoin market had already experienced an upward trend, with the cryptocurrency appreciating by 340% in value (its price at that time was approximately $12). This significant increase in value can be traced back to the inception of Bitcoin, marked by the mining of the Genesis Block in January 2009, which laid the foundation for the growth of the cryptocurrency market.

What happened after the rate halved in November 2012 must have had a surreal effect on investors and speculators at the time. In a single year, Bitcoin rose by just under 8000%, reaching a price of over $1,000.

What followed in December 2013 was no less surreal. Not only because of the Mt.Gox hack, the bitcoin price fell by 80% and failed to recover from this drop for a long time. Only in October 2015 did the trend reverse.

More about the Bitcoin price history in detail

Second bitcoin halving

It took 1316 days (3.6 years) between the first and second bitcoin halving, the block reward decreased to 12.5 BTC on 9 July 2016. The price increased by a whopping 110% to over $600. Only 1,800 new bitcoins are mined each day. In 2017 and the following 18 months, the price of bitcoin increased by over 2,800%, reaching a record $20,000. The 80% drop in bitcoin’s price, back to around $3,200 in December 2018, is impressive.

Third third bitcoin halving

Given the historical data, positive bitcoin price movements can be expected in the early 2020s. This happened in May 2020 and reduced the bitcoin block reward to 6.25 BTC/block. After the last bitcoin halving, the price skyrocketed to new all-time-highs of $69 000.

The next bitcoin halving countdown

So what is the estimated next bitcoin halving date?

To estimate the exact date of the next halving, you can use a Bitcoin halving countdown website or calculator, which takes into account the current block height, the average time it takes to mine a block, and the number of blocks left until the next halving. Keep in mind that the exact date may vary slightly due to fluctuations in the average block time. In the time of writing this text, the next bitcoin halving countdown timer shows an estimate time of arrival: 18th May 2024.

Excited?

Conclusion

Historical data can be a good indicator of the future price performance of an asset. However, there are no guarantees, as in many things in life. Looking at the data of the first two half-years and then the price performance since May 2019, one can understand the positive outlook.

Critical voices warn that the impending forth bitcoin halving could affect its price. Furthermore, they cite the huge number of media reports that the price of bitcoin has once again crossed the $30,000 mark, which could be the reason for a further price increase.

Check out what the experts say about the Bitcoin Price Predicion.

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bitcoin falling down quickly illustration
bitcoin price graphics guy

Marcin Woźniak

In 2018, Marcin first encountered blockchain technology and Bitcoin, which instantly captivated his interest. He possesses a profound passion for technological innovation and the ongoing digitalization of the financial sector. Marcin eagerly anticipates the transformative potential of blockchain on a global scale and is enthusiastic about contributing to this revolutionary movement.