Bitcoin Halving 2024: What Is It, When Will It Happen, and How Will It Affect the Price
An important event for the cryptocurrency market is set to take place in the coming hours — the 2024 Bitcoin Halving. This event could significantly affect the supply and demand dynamics, and consequently, the price of Bitcoin. Read on to learn what halving is, how it works, and how it may impact the price of BTC.
You may have heard of the term Bitcoin halving (Bitcoin Halving), or maybe not, but if you care about the cryptocurrency industry, it's important to know that this significant event will take place within the next 1-3 days.
With this in mind, we think it's useful to explain what Bitcoin halving is, how it works, and how it may affect the market value of BTC and the behavior of market participants.
What is Bitcoin Halving?
The Bitcoin blockchain consists of 839,495 data blocks containing information about Bitcoin transfers between addresses. These blocks are created every 8-12 minutes on average. Bitcoin miners create these blocks by running algorithms that predict (guess) a number from an enormous set of numbers.
The miner who guesses the next number first creates the next block in the BTC blockchain and receives a reward from the blockchain in the form of Bitcoin. Halving (which is what "halving" means) directly affects the size of this reward.
The miner who creates block #839,999 (the last one before halving) will receive a reward of 6.25 bitcoins for this block. However, for the next block, the reward will be exactly half as much — 3.125 BTC.
Bitcoin halving happens every 210,000 blocks, and in April 2024, the fourth halving in the history of the coin will take place. The first halving occurred in 2012, the second in 2016, and the third in 2020.
The 50% reduction in supply will be ensured by tens of thousands of BitcoinCore nodes scattered around the world. If a miner who creates block #840,000 adds a reward greater than 3.125 BTC, such a block will be rejected by the network.
How will Bitcoin halving affect price and the market?
Since miners are the only suppliers of Bitcoin to the market, a shock reduction in supply is expected, and the reasons for this are quite logical. After halving, the mining reward will be reduced by half, while the cost of producing a single block will remain the same.
As a result, major miners who will create blocks after block #839,000 will freeze their Bitcoin sales until the market price of BTC exceeds the cost of mining the coin. With this strategy, they will undoubtedly cause a noticeable reduction in the available supply of Bitcoin. Reduced supply, with unchanged demand, traditionally drives the price of an asset up on the exchange.
How can Bitcoin halving affect demand?
With new Bitcoin ETF tools, market operators are almost daily buying more bitcoins than the current supply can provide. How will the price situation on exchanges change if the supply of new bitcoins on the market decreases by half, while demand for BTC does not decrease?
In this situation, the price of BTC has no other option but to move upwards in order to satisfy the demand for BTC in dollar terms, if the available volume of Bitcoin is insufficient for purchase on exchanges and through over-the-counter channels.
Let's explain with an example. A buyer wants to buy bitcoins for 1,000,000 dollars, but at the current price, only bitcoins worth 200,000 dollars are available. If a market purchase is made for the full amount of 1,000,000 dollars, the price of Bitcoin will rise until sellers willing to sell at the new (higher) price are found.
Of course, this won't happen immediately, and there will be a certain time lag because traders rarely place market orders to buy Bitcoin in such large amounts in a single order.
They buy the required volume slowly and not sharply, until the supply reserves run out. Gradually, the supply of Bitcoin for sale at the specified price will end. The buy order prices will increase, and the volume will be bought from Bitcoin sellers willing to sell at the new price. And so on — this is the mechanism for the growth of Bitcoin's exchange price.
Key Takeaways about Halving
Investing in Bitcoin is a long-term game, and many investors will hold their BTC for years or even decades. And right now, on the cusp of the next halving, there are some important points to consider:
- If you look at Bitcoin's price history, previous halvings did not demonstrate record growth peaks immediately before the halving.
- The balances of Bitcoin on exchanges are currently at their lowest level since 2017.
- There is an unconfirmed rumor in the industry that the Bitcoin halving in 2024 could be canceled.
Keep these factors in mind when analyzing the market for making trading and investment decisions. And know that many major market experts agree that, based on the above and other factors, the price of Bitcoin will be significantly higher by January 2025, and the $100,000 mark for 1 BTC will be reached before the end of 2024. Wishing you successful trading and profitable investments!