All About Bitcoin Halving: What to Expect in Bitcoins Halving 2024?

If the buzz around Bitcoin halving 2024 has left you scratching your head, fear not! You’re not alone. Crypto jargon can indeed be daunting, but we are here to demystify all about crypto halving in this blog. 

We will explain what Bitcoins halving is, look at its evolution over the years, understand its mechanism and discuss what to expect from Bitcoins halving 2024! 

Let’s dive in! 

What is Bitcoin Halving?

In the Bitcoin blockchain software, new bitcoins are introduced into circulation as block rewards, which are earned by individuals or miners through a process called  “mining”. These miners utilize costly electronic equipment to earn or mine them. 

In each Bitcoins halving, the total number of bitcoins that miners can potentially receive is halved. Simply put, every four years, the reward for mining new blocks is reduced by 50%, resulting in miners receiving half the number of bitcoins for verifying and adding transactions to the blockchain. This means that the rate at which new bitcoins are created is reduced by half.  

For instance, when the system was initiated in 2009, successful miners were awarded with 50 bitcoins every 10 minutes. Fast forward through three halvings, and now 6.25 bitcoins are dispensed every 10 minutes. This process will continue until the total number of bitcoins in circulation reaches 21 million. It’s speculated that this milestone will be reached around the year 2140.

Clearly, from its inception, Bitcoin has been engineered to become increasingly scarce over time, to mitigate inflationary pressures. With a cap of 21 million bitcoins, of which approximately 19.62 million have already been mined, Bitcoin’s scarcity mirrors that of precious metals like gold, lending it the moniker “digital gold.”

Bitcoins halving hold significance for traders as they decrease the rate at which new bitcoins are produced by the network. This reduction in the supply of new coins has the potential to drive up prices if demand remains robust.

Historical precedent indicates that leading up to and following previous halving events, Bitcoin’s price has experienced rapid appreciation. However, it’s crucial to recognize that each halving is unique, and the demand for Bitcoin can fluctuate dramatically based on various factors. 

Before we dive into all of that, let’s understand how Bitcoins halving works? 

How does Bitcoins Halvening Work?

A bitcoin halving is built into the underlying blockchain software and it is the software that dictates the pace at which new bitcoins are generated.

This software mandates that computers within the network validate transactions – a process referred to as ‘mining’. When a miner successfully proves the validity of the selected transactions, the software compensates them with a certain number of new bitcoins. Transactions are verified into clusters known as ‘blocks,’ and the network is programmed to reduce the reward granted to miners by half every 210,000 blocks.

When Was The First Bitcoin Halving?

The first Bitcoin halving event took place on November 28, 2012. This event was programmed into the Bitcoin protocol from its inception by its creator, Satoshi Nakamoto.

So, what changed after the first Bitcoins halvening event ?

• Before the first crypto halving, miners were rewarded with 50 bitcoins for each block they successfully mined. When the first halving occurred, the block reward was reduced from 50 bitcoins to 25 bitcoins. Hence, now the miners received half the number of bitcoins for each block they mined, slowing down the rate at which new bitcoins entered circulation.
• The significance of the first crypto halving extended beyond its immediate impact on mining rewards. It underscored Bitcoin’s deflationary monetary policy, which contrasts with the inflationary policies of traditional fiat currencies controlled by central banks. 
• Bitcoin’s capped supply of 21 million coins and the predictable halving schedule are key features that contribute to its perceived scarcity and store of value properties.
• Moreover, the first crypto halving event garnered attention from both the crypto community and the broader financial world. It sparked discussions about Bitcoin’s long-term viability, its potential impact on the global economy, and its role as a hedge against inflation.

In hindsight, the first Bitcoin halving event marked the beginning of a new phase in Bitcoin’s evolution, setting the stage for subsequent crypto halvings and shaping the narrative around Bitcoin as digital gold—a scarce and valuable asset in the digital age.

Bitcoin Halving History 

Here’s an overview of Bitcoin halving history. Impact of each crypto halving event is discussed on the Bitcoin prices and mining rewards: 

Now, let’s discuss in detail the impact of each Bitcoins halving event in detail: 

While understanding the impact of crypto halvings, it is important to consider a metric called the Stock-to-Flow ratio. This compares the existing supply of Bitcoin to new coins entering circulation. With the upcoming halvings in 2024 and 2030, Bitcoin’s scarcity is set to escalate, potentially surpassing even the preciousness of gold by 2032!  

Reflecting on Bitcoin’s historical performance post-halving unveils a pattern of exponential growth in Bitcoin’s price. 

• Following the 2012 halving, Bitcoin’s market cap surged by 342% within 100 days, with the price peaking at a remarkable $1,152 the following year, marking an astounding 8,761% leap. 
• Similarly, after the 2016 halving, which saw rewards reduced from 25 to 12.5 BTC, Bitcoin’s price skyrocketed to $17,760 the subsequent year, a 2,572% increase. 
• The most recent halving in 2020, slashing rewards to 6.25 BTC, propelled Bitcoin’s price to $67,549 within a year, representing a solid 594% growth. 
• While Bitcoin’s price typically experiences significant growth after each halving, the rate of that growth tends to diminish with each subsequent crypto halvings event. 
• Bitcoin’s growth rate declined after previous halving events – by approximately 70.64% from the first halving to the second, and by about 76.91% from the second to the third. 
• By averaging out these decreases, we arrive at a growth rate decrease of approximately 73.78%. 
• Applying this rate to the 594.03% growth observed after the third halving yields a speculative growth rate of around 155.79% following the 2024 halving. This projection suggests that Bitcoin could potentially reach a value of approximately $111,807 within one to one and a half years post-halving. 
• However, it’s essential to note that this analysis is purely speculative and should not form the basis of investment decisions.

Bitcoins halving are set to happen approximately every 210,000 blocks until roughly the year 2140, by which time all 21 million coins will have been mined.

Each Bitcoins halvening event represents a milestone in the cryptocurrency’s evolution, shaping its economic model and reinforcing its value proposition as a decentralized digital currency with limited and predictable supply.

Why Does Bitcoin Halve Every Four Years ? 

Bitcoin undergoes halvings as a result of its software design, which was crafted by  either a figure or a group known by the pseudonym ‘Satoshi Nakamoto’. Although Nakamoto has not explicitly explained the rationale behind halvings, there are various speculations regarding their purpose. 

• One hypothesis suggests that Bitcoins halvings were engineered to expedite the distribution of coins initially, incentivising individuals to participate in the network and engage in block mining. According to this theory, the scheduled reduction in block rewards was intended to occur at regular intervals, anticipating that the value of each rewarded coin would rise as the network expanded. 
• Another hypothesis states that the crypto halvings were implemented to introduce deflationary measures into the currency, thereby pre-determining the number of new coins rewarded per block. This contrasts with fiat monetary systems, where excessive printing by central authorities can lead to sustained devaluation of the currency. By fixing the total supply of bitcoins available and regulating the rate of new Bitcoin issuance, this design feature helps mitigate such risks. 

While Nakamoto did not explicitly state why a four-year interval was chosen, there are several reasons why this timeframe may have been selected:

• As discussed, by halving the block reward every four years, Bitcoin’s issuance rate decreases gradually over time. This gradual reduction aligns with the concept of diminishing inflation and reinforces Bitcoin’s scarcity model, akin to precious metals like gold.
• The four-year crypto halvings cycle introduces predictability into Bitcoin’s monetary policy. Miners and investors can anticipate the timing of each halving event, allowing them to plan accordingly and factor it into their decision-making processes.
• The choice of a four-year cycle may have been influenced by historical precedent or convention. Many economic and financial cycles, such as business cycles, have approximately four-year intervals, which may have served as a reference point for Nakamoto.
• The four-year halving cycle helps strike a balance between incentivizing miners to secure the network through block rewards and ensuring long-term sustainability by gradually reducing new coin issuance. This balance is crucial for maintaining network security and aligning incentives among network participants.

Critics of Bitcoin’s design, including its halvings and finite supply of 21 million coins, argue that it fosters a tendency among users to save rather than spend, anticipating long-term appreciation in coin value. This behavior may have contributed to past cycles of speculative booms and subsequent busts, with users hoarding coins only to sell off at critical junctures. 

Additionally, some detractors liken Bitcoin to a pyramid (Ponzi) scheme due to these dynamics, asserting that the system disproportionately benefits early adopters.

How does Halving Affect Bitcoin’s Price?

When Bitcoin goes through a halving event, the reward for mining new bitcoins gets cut in half. This reduction means there are fewer new bitcoins entering circulation.

Now, as Economics 101 will tell you, when there’s less of something but still a demand for it, its value tends to go up. That’s what often happens with Bitcoin after a halving event. With fewer new bitcoins being created, the existing ones become more valuable. So, many people expect the price of Bitcoin to rise around the time of a halving event.

But here’s the catch: while the anticipation of scarcity may drive up prices, it’s not a guaranteed rocket to the moon. Market dynamics, investor sentiment, and other factors play a role too. So, while crypto halvings can be a bullish signal for Bitcoin, it’s not the only factor influencing its price.

Bitcoin Halving 2024: What to Expect?

The upcoming bitcoins halving is anticipated to take place around April 2024, coinciding with the production of the 740,000th block. During this event, the block reward will decrease from 6.25 bitcoins to 3.125 bitcoins. The precise date of the halving remains uncertain due to variations in the time required to generate new blocks, with the network averaging one block every ten minutes.

The 2024 Bitcoin halving event is expected to create a sharp divide between Bitcoin miners. 

• Miners with outdated equipment and steep electricity costs will face a tough situation. 
• For example, in countries like Italy, the cost of mining a single Bitcoin can skyrocket to the price of luxury cars, reaching up to $208,560.
• The upcoming crypto halvings will reshape the mining landscape into a highly competitive arena, where only the most robust miners equipped with efficient technology and access to affordable energy will thrive. 
• It will become a test of strategy and resilience, with only those employing savvy and cost-effective tactics emerging victorious.

The 2024 Bitcoin halving promises significant upheavals, impacting mining operations and potentially causing fluctuations in Bitcoin’s price. 

However, it is essential to note that the exact impact of the upcoming halving on Bitcoin’s price remains uncertain. While many analysts anticipate a pattern akin to previous halvings, with prices rising following the event due to the constrained supply of new coins, nothing is definitive. 

The trajectory of Bitcoin’s price post-halving will heavily rely on the demand for bitcoins during this period. It’s essential to note that demand is not guaranteed to increase or even remain stable. 

The cryptocurrency market has matured significantly since the last halving in 2020, with numerous well-established cryptocurrencies vying for users, potentially altering the dynamics of Bitcoin’s demand. It is also speculated that the halving may not have a significant impact on price this year, largely due to its predictability.

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