How Bitcoin Halving Impacts Crypto Market in 2024

With the next Bitcoin halving approaching in mid-April, 2024, let’s explore the key aspects of this pivotal event in BTC’s history: when to expect it, and what impact it might have on the flagship cryptocurrency and the industry in general. 

What is Bitcoin halving?

Halving is a planned reduction in the number of newly issued coins that are created and distributed to miners who perform verification and validation of transactions on the network. This is built into the BTC code to ensure that the total number of coins never exceeds 21 million units.

The first halving took place in November 2012, slashing the block reward (the number of BTC awarded to miners for verifying each transaction block) from 50 BTC to 25 BTC. The second reduction occurred in July 2016, with the reward dropping from 25 BTC to 12.5 BTC. The most recent halving, in May 2020, saw the reward decrease from 12.5 BTC to 6.25 BTC.

This time, the block reward will be cut to 3.125 BTC, consequently lowering the annual inflation rate of the leading cryptocurrency from 1.7% to 0.8%. As of writing on April 11, 2024, nearly 94% of all BTC supplies, totaling 19,679,025 BTC, have been mined. According to bitbo.io data, 900 Bitcoins are mined daily, leaving 1,320,975 coins to be mined before the final halving in 2140, which will cap the total supply at 21 million BTC.

How Bitcoin price changes after halvings

Historically, halving events have impacted the Bitcoin price, often coinciding with periods of bullish sentiment.

Let’s break down what happened to the price of the first cryptocurrency in its first halving, which took place on November 28, 2012. For six months before the event, the price was stable and remained around $5. By October, i.e. a month before, it more than doubled, though on the halving day, it held around the same range — $12. While the price did not skyrocket either immediately after or a few weeks later, Bitcoin reached an impressive $130 six months later.

The second Bitcoin halving happened on July 9, 2016. Looking at the Bitcoin price chart, we see that six months before the halving, it was trading at $457. A month before, the price rose by more than $100. On the eve of the event, BTC grew even more, reaching around $650, and remained roughly in this price range on the day itself. It’s worth noting that the price fluctuated slightly immediately after the event and even lost $100 a month later. Whereas, after half a year, Bitcoin showed significant growth, reaching a value of $963.

In December 2019, six months before the third halving in May 2020, Bitcoin was trading around $7,200. This price remained relatively stable for the next five months. A few days before the event, the price began to rise. This upward trend continued on the day of the halving and for a few days afterward, with Bitcoin hovering around $9,700. By July 2020, Bitcoin was still trading in a range between $9,400 and $9,700. Then, six months later, the upward trend resumed, pushing Bitcoin above $14,000 by November. 2020.

The most recent halving, which took place on May 11, 2020, saw Bitcoin priced at $8,700. By April 2021, the price had surpassed $63,500.A few months later, by April 2021, it had surpassed $63,500. While already in May of the same year, a price correction occurred, dropping BTC to $31,000. Despite this, in November, the coin reached its ATH again during 2021, climbing above $64,800.

Bitcoin’s upcoming halving arrives under unusual circumstances. The price has already hit its all-time high of $73,803 before the event amidst steady inflows into spot Bitcoin ETFs in the US.

Data from CoinGecko, analyzing each cycle, reveals an average increase of 3230% following halving events. However, it’s important to note that this figure is heavily influenced by the first one, where the exchange rate soared by a remarkable 8858%. The second and third block reward reductions saw more modest increases of 294% and 540%, respectively.

However, past performance does not guarantee future results, and numerous factors influence Bitcoin’s price. Moreover, as the cryptocurrency pioneer develops and becomes more widespread over time, its price may become less volatile and more stable.

How might the Bitcoin halving impact the Bitcoin price?

Despite having historical data indicating a positive impact on Bitcoin’s price, we must acknowledge that there is no direct connection between these events. Furthermore, this time the historical pattern may face a potential challenge. The upcoming event might not result in the expected price surge. Historically, Bitcoin’s price typically reached new highs in the months following reductions in the number of issued coins, not immediately before the event. 

Coinbase analysts suggest that the crypto community may be overly focused on price movements during the halving period without considering broader industry conditions. According to their March report, Bitcoin’s performance during previous halving events was likely influenced by the broader context. This could explain the varying price trends in different cycles. Coinbase analysts suppose that the 2016 Brexit vote and the hype around initial coin offerings (ICO) in 2017 acted as potential catalysts for buying dominant crypto. Additionally, the liquidity of the coin was further boosted by the COVID-19 pandemic in early 2020. So should investors be worried about this possible deviation from the historical pattern? Let’s explore!

Both Anthony Scaramucci, CEO of Skybridge Capital, and Hao Yang, head of financial products at Bybit, share optimistic perspectives on Bitcoin’s future price movements. Scaramucci believes that the halving has yet to be fully integrated into BTC’s price, forecasting a price of $170,000 in the 2024 cycle. Conversely, Yang envisions a longer-term horizon, suggesting that based on historical patterns, the main crypto could surge to $435,000 by 2028, citing a 650% price rally since the 2020 halving.

This bullish stance contrasts with the perspective of Fred Thiel, CEO of Marathon, the world’s largest publicly traded crypto miner. In an interview with Bloomberg, Thiel shares that he anticipates a more muted response, suggesting the upcoming halving may have already been priced into the Bitcoin rate.

Some, like Arthur Hayes, the former CEO of BitMEX, predict a positive medium-term impact on BTC. However, he warned of potential short-term volatility before and after the event, suggesting prices could fall significantly. This cautious outlook led him to avoid trading until May.

Greg Magadini, a financial analyst at Amberdata, argues against the idea that the Bitcoin halving will trigger a sudden surge in volatility. He points out that historically, significant price increases after a miner reward reduction have not happened immediately. Instead, they typically occurred within a timeframe of 12 to 18 months.

A similar take is shared by the analytical company Kaiko, which drew attention to the fact that after previous halvings, the price of the digital asset typically experienced strong growth within the next 9-19 months. Whereas, the initial months following these events often see fewer price increases. In fact, the 2016 market cycle even witnessed a price decline after the event itself.

How might the Bitcoin halving impact the Ethereum price?

The first Bitcoin halving in 2012 occurred before Ethereum’s creation, so there is no relevant data from that time. In 2016,  Ether, being a young asset, slightly followed the market trend. In the following months, its price increased by around 20%. However, when the third Bitcoin halving happened on May 11, 2020, ETH picked up the pace.

While these historical trends show positive movements, they are insufficient to establish a clear correlation. To gain a better understanding, let’s explore what analysts predict for the 2024 halving’s impact on Ethereum.

Crypto trader Jelle identified a potential price surge for ETH after April 20. Analyzing historical data, Jelle noticed a similar price pattern in ETH leading up to the last Bitcoin halving on May 11, 2020. Back then, Ethereum’s price was around $210, and Jelle believes the previous event triggered a subsequent rally for ETH.

Joey Garcia, head of public affairs, policy, and regulation at Xapo Bank, anticipates a positive impact on market sentiment from the halving. He expects this to lead to an influx of resources and innovation into broader cryptocurrency ecosystems, specifically mentioning Ethereum as a potential beneficiary.

Alun Evans, co-founder of Laos Network, acknowledges that cutting mining rewards in half directly impacts the leading digital currency, but its influence extends beyond, having a ripple effect across the entire cryptocurrency ecosystem, including its closest competitor. He argues that the reduced supply of new coins entering the market creates scarcity, potentially driving up the leading digital currency’s price. This, in turn, could trigger price increases for other cryptocurrencies as investors diversify their portfolios.

Final thoughts 

The countdown is on for the next Bitcoin halving, scheduled for around April 20th. While the long-term outlook seems bullish, with many experts predicting sustained growth, the short-term impact remains uncertain. An explosive price surge might not materialize immediately, and even a correction is possible.

The fate of Ethereum, the second-largest cryptocurrency, is also up in the air. However, the halving undoubtedly represents a pivotal moment for the entire crypto industry, potentially shaping the future of the broader crypto landscape.

FAQ

What will be the price of Bitcoin after 2024 halving?

While predicting the future price of Bitcoin is difficult, the long-term outlook seems bullish. Many experts predict sustained growth, but the short-term impact remains uncertain. An explosive price surge might not materialize immediately, and even a correction is possible.

Does the Bitcoin halving impact its price?

Despite historical data suggesting a positive impact, there isn’t a guaranteed connection.