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Bitcoin Halving and How It Might Affect Its Price

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Bitcoin halving is expected to take place in April 2024. Credit: Onov3065, Wikimedia Commons, CC BY-SA 4.0

Get ready for a major event in the world of cryptocurrency. The next Bitcoin halving is coming in April 2024.

But why should Bitcoin halving matter to us?

Approximately every four years, the amount of new bitcoins that enter circulation in the world gets cut in half. This helps control the supply of Bitcoin and maintain its value over time. Halvings are a key part of Bitcoin’s DNA, as they were designed by its mysterious creator Satoshi Nakamoto.

As we approach the 2024 halving, anticipation is building. Will this new Bitcoin halving send the price of Bitcoin soaring as previous halvings did? How will it impact miners and the network? How much higher can Bitcoin really go? These are questions everyone asks, and yet no one knows with definitive certainty the answers to them.

It’s pays to be at least somewhat informed about Bitcoin halving, including its history, significance, and more importantly, what to expect in 2024.

What is Bitcoin halving and how does it work?

Bitcoin halving is an event that occurs approximately every four years. To be more precise, it is meant to take place after every 210,000 blocks are mined. Once this milestone is reached, the block reward given to Bitcoin miners for processing transactions is cut in half.

This mechanism was built into the Bitcoin protocol by Satoshi Nakamoto from the early Bitcoin days to control the supply of new bitcoins entering circulation over time and protect its value from plummeting.

Halvings have so far occurred in November 2012 (50 BTC to 25 BTC), July 2016 (25 BTC to 12.5 BTC), and May 2020 (12.5 BTC to 6.25 BTC). The next halving is expected around April 2024.

As one can understand, this will further reduce the block reward to 3.125 BTC from its current 6.25.

Bitcoin halving history on prices

Historically, Bitcoin halvings have been associated with bullish price action, which means a rapid increase in its value. In the months following previous halvings, the price of bitcoin reached new all-time highs. Nonetheless, other factors such as media attention also played a role in this. This is something that complicates the topic.

During these past price rallies, the magnitude has varied significantly. After the first halving in November 2012, the price of Bitcoin surged from around $12 to over $1,000 within a year. It was quite a remarkable performance.

The July 2016 halving saw BTC rise from about $650 to nearly $20,000. This happened by December 2017, making it an even-more impressive performance in just eighteen months. Following the most recent halving in May 2020, Bitcoin climbed from $8,787 to an all-time—for the time—high of $67,549 by November 2021.

While this clearly suggests a pattern of post-halving price appreciation, other—significant or not—factors such as increasing adoption and mass media attention also played a very crucial role.

Bitcoin halving 2024: Expert price predictions and opinions

For the aforementioned reasons, the 2024 halving is currently generating both bullish predictions as well as important cautionary notes from many experts.

Bernstein analysts currently believe that the upcoming halving could spark yet another rally. According to their analysis, this could potentially last into late 2025—if historical trends hold.

Meanwhile, SkyBridge Capital’s Anthony Scaramucci sees $170,000 by mid-2025 and $300,000 as a reasonable long-term target for Bitcoin. These are obviously much higher values than its current approximate price of $55,000, raising hopes for big gains for investors. If only we could all be that optimistic!

Factors influencing Bitcoin’s price post-halving

As the 2024 halving approaches, the price of Bitcoin will undoubtedly be influenced by a complex interplay of many factors. These include but are not limited to miner dynamics, overall investor sentiment, and broader market forces closer to the time.

While past halvings provide a compelling pattern that is very difficult to ignore, the growing maturity of the cryptocurrency market means that the next halving’s effects are far from certain. This is fundamentally the reason why investors should monitor the event closely while also maintaining the necessary long-term perspective of the market.

Impact of Bitcoin halving on miner profits and security

Another aspect of the upcoming bitcoin halving that we need to keep in mind is that this major event will significantly impact miner profitability.

As block rewards are cut in half, miners will now increasingly rely on transaction fees to cover their big operational costs. Such a shift could almost certainly lead to higher fees for Bitcoin users. This is believed to be inevitable as miners will have to prioritize transactions with higher fees to maintain the margin of profit they currently have.

Nonetheless, the current low average of miner revenue from transaction fees, which is around two percent, presents a real challenge.

If the price of Bitcoin and its adoption don’t increase enough to compensate for the reduced block rewards, many miners may struggle to remain profitable. This will most probably make them rethink their future in the industry, leading to significant issues.

Such a development could also lead to a wave of miner capitulation and consolidation that could affect the price of Bitcoin. This eventuality might also see smaller, less efficient operations being forced to shut down completely or merge with other, larger players in an attempt to weather the challenges. The mining industry therefore faces a real prospect of becoming much more concentrated to fewer hands. If this comes to fruition, we will see only the most efficient and well-capitalized firms surviving.

Opportunities and challenges presented by the 2024 Bitcoin halving

Obviously, despite these challenges, the upcoming Bitcoin halving also presents opportunities to many.

Historically, the price of Bitcoin has risen significantly in the months following each halving, potentially minimizing or even eradicating the impact of reduced rewards. The halving could also drive innovation as well as efficiency in the mining industry. It is a very real possibility as firms will seek to optimize operations and significantly reduce costs.

Bitcoin halving community sentiment and media coverage

As it becomes clear, the upcoming bitcoin halving is not a trajectory that is set in stone. Community sentiment around halving is genuinely mixed with some expecting a price rally and others cautioning about the potential impact on miners.

Media coverage will very likely intensify, too, as the event approaches, potentially driving a new wave of increased interest and adoption of bitcoin.

These factors, along with the inevitable truth that unpredictable events in the market can change reality at any moment make any analysis on the matter at least precarious.

Key takeaways on the 2024 Bitcoin halving

To conclude, we can all agree that the 2024 Bitcoin halving will definitely be a defining moment for the mining industry and the broader Bitcoin ecosystem.

While the reduction in block rewards poses real-life and significant challenges to many, the impact of the halving of Bitcoin will depend on a complex grid of overlapping factors. This includes, of course, Bitcoin’s price, transaction fee dynamics, and miner efficiency in the medium term.

As with previous halvings, the event will likely lead to short-term volatility as well as long-term changes in the mining landscape as we’ve come to know in the last few years.

Ultimately, the resilience and adaptability of the miners themselves, combined with the continued growth and maturation of the Bitcoin market, will determine the success—or not—of the network post-halving.

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