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Bitcoin Halving is a coded rule in the Bitcoin Core software that automatically reduces daily mining rewards by 50% every 210,000 blocks mined (about 4 years).
Mining is important for Bitcoin because it is a process Validation of Bitcoin transactions And it offers Security for the Bitcoin Blockchain network.
This year, starting with block number 840,000, the block support (aka coinbase reward) will reward a miner who successfully mines a block with 3.125 BTC which is half of what they used to earn (6.25 BTC) per block mined every ~10 minutes. .
Approximately 450 newly mined bitcoins will be added to create approximately 13,500 new bitcoins per month and approximately 164,250 bitcoins added to the total bitcoin supply each year over the next four years until the next halving. This fixed schedule continues until 2140 as a means of predetermining the asset’s fixed inflation schedule.
Bitcoin halving date
Every 4 years a period (cycle) is completed and the reward miners receive for validating transactions that keep the network secure is halved. A quick look at the previous halvings can indicate what could happen in terms of price action:
Half-year 2012 (11/28/2012)
- Half day price: $12.35
- New BTC per block (pre-halving): 50 BTC per block
- New BTC per block (after halving): 25 BTC per block
- Price 150 days after halving: $127.00
- Change between the following half: An increase of 52 times
2016 half term (07/09/2016)
- Price on halving day: $650.63
- New BTC per block (pre-halving): 25 BTC per block
- New BTC per block (after halving): 12.5 BTC per block
- Price for 150 days after halving: $758.81
- Change between the following half: An increase of 13.5 times
Half 2020 (05/11/2020)
- Price on halving day: $8,821.42
- New BTC per block (pre-halving): 12.5 BTC per block
- New BTC per block (after halving): 6.25 BTC per block
- Price after 150 days: $10,943.00
- Change between the following half: 8x increase (Estimated at $72,000/Bitcoin)
Bitcoin price is a series of higher highs and higher lows than the previous four-year cycles. No other asset has the same reliable scarcity as Bitcoin.
“But this time it’s different!”
We’ve heard this for years. Each previous cycle, at the time, was described as different. Looking at historical data, it was actually the same. High highs, low lows, accumulating, giving up and then re-accumulating. Substitute the unique black swan event(s) for each 4-year cycle and you will still have the same old, almost predictable price action.
In the past three 4-year cycles, Bitcoin has been relatively predictable.
- First year (3 months): Lateral pricing
- Year 1-2: Bull market
- Year 3: Bear
- Year 4: Recovery before the next sell-off + sell-off before the halving
The Bitcoin market has grown over the years among a small number of market participants with limited capital to support mines that sell their Bitcoin reserves to cover costs.
But this time it’s different. We never had Wall Street to absorb the supply sell-off.
The ETFs hold approximately 180,000 bitcoins In their reserves ($55 billion USD) and are traded ~4 billion dollars daily and devours up to $200 million The average daily supply in the weeks leading up to the halving puts upward pressure on the price.
To put this into perspective, only 55,000 new Bitcoins have been produced by miners since the launch of the ETFs in January 2024. The ETFs have consumed three times the number of Bitcoins mined, and the amount of newly produced Bitcoins will be halved thanks to the upcoming halving in April 2024. .
When the amount of Bitcoin produced decreases by 50%, ETFs may be forced to raise the price of BTC to stimulate liquidity from long-term (LTH) holders.
Fixed supply ceiling for Bitcoin
Bitcoin is the only asset in history with a fixed supply. The maximum of 21,000,000 Bitcoins is the absolute limit that can ever be produced.
Bitcoin is not elastic. Consider another commodity with limited supply, gold. When the price of gold rises, more companies mine gold to meet demand. They may resort to using historically unprofitable methods when demand rises. Once the price returns to normal, these methods are closed and remain inactive until the next market high.
In theory there is an unlimited supply of gold to be mined.
As a long-term store of value, the relative scarcity of gold represents a riskier value compared to the absolute and immutable scarcity of Bitcoin.
The balance between supply, demand and price is normal for gold and other “commodities”. Bitcoin is different.
Bitcoin does not suffer from supply uncertainty. It only has demand and price due to supply being halved. Miners cannot produce more supplies to stabilize prices as you see in the oil and gold markets.
Over time, the “Veblen effect” could take over due to the desire for a good increase in its price when Bitcoin equals gold. Parity occurs at approximately $500,000 USD per Bitcoin which will certainly raise the status of the crypto asset as the “new gold.”
Bitcoin is still considered the best currency ever invented. Remember that all money was invented, and only fiat currencies (USD) are charged money by government decree. Here’s how Bitcoin stacks up against other funds:
Bitcoin Halving Metrics to Watch
The immediate approval of ETFs for 2024 has created a more balanced market that should limit downward volatility over time and ultimately result in commensurate price increases.
ETFs will likely continue to see increased inflows as new accredited participants order Bitcoin. On April 4, 2024, BlackRock added Goldman Sachs, Citigroup, UBS, Citadel Securities and ABN AMRO to its list of access points that can place orders to buy and sell Bitcoin.
rising? We think so. It’s hard to imagine a situation where the simplistic view isn’t that more demand (ETFs) + reduced supply (half) = higher price.
There are several topics and metrics to monitor after the halving:
- Long term owners make gains.
- Active Supply vs. Passive Supply: As coins move from passive wallets to exchanges, there is a high expectation of selling. The older the coin being sold, the greater the signal at the top or bottom of the market. You can see HODL waves, currency destructive days, and exchange inflow/outflow volume metrics.
- Mining equipment or alternative energy upgrades.
- Imagine that you are a miner. After the halving, your costs remain constant but your revenue for verifying transactions is cut in half. Inactive miners may need to sell Bitcoin held in reserves to cover immediate costs unless the price rises in the medium term. (coinbase a report)
- Short-Term Activity: Short-term shareholder trading indicates an increase in trading interest from a macro standpoint which is building momentum or consolidation. Metrics to watch: RHODL and short versus long SOPR.
- Imagine you are a miner. After the halving, your costs remain constant but your revenue for verifying transactions is cut in half. Inactive miners may need to sell Bitcoin held in reserves to cover immediate costs unless the price rises in the medium term. (coinbase a report)
- The “ripple effect” of media coverage and hype drives new entrants into the market.
- Increasing pressure on the Fed to lower interest rates from around 5%, investors (speculators) may reallocate money away from Treasuries to more profitable investments with higher upside when interest rates begin to fall.
- Increased regulation, global adoption, FOMO, and institutional interest will also be factors we pay attention to.
Bitcoin halving is a highly publicized anti-inflationary feature and one of the best money ever invented. If history repeats itself, we are entering a bull market over the next 12 to 24 months.
It’s another step on the path towards Bitcoin’s role in the future of money.
Adoption will continue to increase while those of us who dollar-cost average ignore the highs and lows, realizing that we are still a cycle or two away from the rest of the world realizing that the current financial system is designed to fail before a global crisis occurs. Redistribution of wealth.