Will Bitcoin Halving Increase Price? Everything You Need to Know

As the Bitcoin halving approaches in April, the crypto community is buzzing with speculation about its impact on Bitcoin’s price. This event, which halves the mining reward, has historically led to bullish market sentiment due to the reduced supply of new bitcoins entering circulation. But the big question remains: Will the upcoming halving Bitcoin trigger increase its price, or are other factors at play?

This blog takes a deep dive into the history of Bitcoin halving to give a clear picture of the price performance post-2024 halving.

Will Bitcoin’s price increase post-halving?

Understanding if Bitcoin’s price increases post-halving

The potential impact of Bitcoin halving on its price is a topic of considerable interest within the cryptocurrency community, and for a good reason. Historically, halving events have been closely observed for their influence on Bitcoin’s market dynamics. 

While focusing on Bitcoin, it’s also insightful to explore how the upcoming Bitcoin halving could ripple through the wider cryptocurrency ecosystem, including its potential impact on Ethereum’s market.

Factors that may influence Bitcoin’s price post-halving

The entire crypto community is awaiting the 4th Bitcoin halving scheduled for April 19, 2024. While most people expect the price to spike, it’s important to understand the factors that contribute to the potential for price appreciation. Take a look:

1. Reduced supply

The core mechanism of Bitcoin halving directly reduces the rate at which new Bitcoins are generated and enter circulation. This halving mechanism cuts the block reward given to miners by half, effectively limiting the new supply of Bitcoin every four years.

According to basic economic principles, a reduction in the supply of a commodity, assuming demand remains constant or increases, can lead to an increase in its price. The halving events underscore Bitcoin’s scarcity, which would lead to an inevitable “supply shock.”

The number of BTC mined per day would also be cut down from the current supply of 900 BTC/day to 450 BTC/day post-halving, which will contribute to a massive price surge.

2. Increased holding

Miners, who are pivotal to the creation and security of Bitcoin, receive reduced rewards post-halving. This reduction in rewards could incentivize miners to hold onto their newly minted Bitcoins rather than sell them on the market to cover operational costs, such as electricity and hardware maintenance. 

By reducing the selling pressure from miners, the available market supply of Bitcoin could decrease, further contributing to potential scarcity and price appreciation.

3. Psychological factor

The halving event also carries a significant psychological impact on investors and the broader cryptocurrency community. The anticipation and coverage of the halving can generate excitement, drawing attention from both existing and potential new investors. This increased interest can lead to a surge in buying activity as participants speculate on the halving’s potential to drive up Bitcoin’s price. 

The psychological aspect is bolstered by historical precedents where previous halvings have been followed by periods of notable price increases, creating a sense of optimism and speculative interest in these events.

For those wondering how to navigate the market around the halving event, seeking expert advice on how investors should play the upcoming Bitcoin halving can offer valuable strategies.

Historical analysis of previous Bitcoin halvings

Bitcoin’s price spike following all previous havings

Take a detailed look at Bitcoin’s price following all the previous halving:

1. The first halving (November 28, 2012)

The first Bitcoin halving in 2012 was a watershed moment for the cryptocurrency. By cutting the block reward from 50 BTC to 25 BTC, it introduced the concept of digital scarcity to a wider audience. Prior to the halving, Bitcoin’s price hovered around $12.35, reflecting a nascent market that was still in its early stages of understanding Bitcoin’s value proposition. 

Within six months after halving, the price of one BTC went up to $127, followed by a dramatic price surge to approximately $1,000 by November 2013.  The aftermath of this halving saw Bitcoin undergo its first major correction, a cycle of boom and bust that would become a recurring theme in its history. 

Despite these fluctuations, the first halving firmly established Bitcoin’s position as a serious contender in the financial world, sparking debates on its viability as both a store of value and a medium of exchange.

2. The second halving (July 9, 2016)

The second Bitcoin halving event in July 2016 further solidified the economic model underpinning Bitcoin’s supply. Reducing the block reward to 12.5 BTC, this halving was eagerly anticipated by the community, many of whom expected a repeat of the price performance seen after the first halving. Despite a backdrop of skepticism and negative narratives surrounding Bitcoin’s future, the price resilience in the face of adversity was notable. 

The price at the time of the halving stood at around $650. Within six months, the price had spiked considerably, reaching $758. What followed was an extraordinary bull run that took Bitcoin’s value to over $20,000 by the end of 2017, capturing the attention of mainstream media and investors worldwide. A growing recognition of Bitcoin marked this period as more than just an experimental digital currency. 

It was becoming a new asset class in its own right. The second halving demonstrated the cyclic nature of Bitcoin’s market dynamics, where halving events serve as catalysts for renewed interest and investment, pushing the price to new highs.

3. The third halving (May 11, 2020)

By the time of the third halving in May 2020, Bitcoin had established itself as a significant player in the financial market. The reduction of the block reward to 6.25 BTC occurred against a backdrop of a global pandemic, economic uncertainties, and a rapidly changing financial landscape. 

The price of Bitcoin at the halving was approximately $8729.86, a testament to its growing stability and acceptance as an investment asset. The months following the halving saw Bitcoin’s price increase and touch BTC’s all-time high (ATH) value of $69,000 by November 2021, underlining its role as “digital gold” and a hedge against inflation.

Mark your calendars for April 19, 2024, and dive into the detailed analysis of what this event could mean for the market with our piece on the implications and expectations of the next Bitcoin halving.

Effect of Bitcoin ETFs on the price of Bitcoin

Bitcoin exchange-traded funds (ETF) approval’s effect on the 2024 halving

The upcoming Bitcoin halving, expected in April 2024, is generating considerable interest, especially in light of the approval of spot Bitcoin ETFs in January 2024. These developments could significantly impact Bitcoin’s price and market dynamics.

The approval of Bitcoin ETFs is seen as a pivotal moment that could drive substantial inflows into Bitcoin, mirroring the impact of the gold ETF launch in 2004 on gold prices. With the next halving on the horizon, market observers are optimistic about the possibility of a new Bitcoin ATH.

Analysts and market observers are contemplating how the combined effect of the halving and the approval of Bitcoin ETFs could reshape the digital asset landscape. Some predictions suggest that Bitcoin’s price could surge to as high as $150K on the back of these developments. However, you must remain aware of the risks involved, as market dynamics can influence a variety of factors beyond just supply and demand.

How long after halving does Bitcoin peak?

Given the historical data, there seems to be a trend of Bitcoin reaching its peak price less than two years after each halving, with notable bull runs following these events. However, owing to several factors, including the spot ETF launch, rising involvement of institutional investors, etc, analysts expect that BTC will touch its peak price sooner.

However, as always in the cryptocurrency market, while historical trends can offer guidance, they should not be the sole basis for making investment choices due to the market’s inherent volatility and unpredictability.

One key aspect of the halving is its impact on mining rewards. Understanding this effect is crucial for comprehending how the supply dynamics might influence Bitcoin’s price.

The future of Bitcoin post-halving

Wrapping up

While past Bitcoin halvings have often led to significant price increases, it’s essential to consider the broader market dynamics and macroeconomic factors that also influence Bitcoin’s value. The evolving landscape of the cryptocurrency market, including regulatory changes and institutional participation, could modify the impact of halving. 

In essence, the Bitcoin halving is an important event, but it’s just one of many factors that investors should weigh in their market analysis.