Bitcoin Halving: What Is Expected From The Fourth Edition?

Bitcoin halving is a vital event in the Bitcoin network that happens every four years. In 2024, when it occured on April 19, the event was widely observed and anticipated by all stakeholders in the crypto industry. Even months later, speculations are rife about the future movement of Bitcoin (BTC) that could be a direct result of the halving event.
Why is the Bitcoin halving event so important? Has 2024’s halving event affected the crypto market? In this blog, we will decipher all these aspects of the Bitcoin halving event.

What is Bitcoin halving?

Bitcoin halving reduces the amount of block rewards given to miners in the Bitcoin network, reducing the supply of Bitcoin in circulation. The halving event, taking place roughly every four years, is thus a major update in the Bitcoin network that directly impacts the price of BTC.

The first Bitcoin halving event happened in 2012 when block rewards were reduced to 25, with the subsequent events in 2016, 2020, and 2024.

Initially, Bitcoin miners were rewarded with 50 BTC for mining each block. Since each Bitcoin halving event has reduced this reward by 50%, the current block reward for a miner amounts to 3.125 BTC. At this rate, to maintain the supply of 21 million BTC, the last Bitcoin halving event is scheduled for 2140. Currently, BTC has a circulating supply of about 19.7 million.

How has Bitcoin fared in 2024?

Source | The crypto rally of 2024 was mainly led by BTC

If you observe the above chart, it is apparent that Bitcoin had started 2024 trading above $40,000. The initial crypto rally at the end of 2023 had emerged on the back of the likely spot Bitcoin ETFs, which finally saw their approvals in January 2024. Following the launch of the ETFs, the bullish trajectory of Bitcoin continued well into March, when it had already crossed $60,000.

At this juncture, the sentiments in the crypto market started revolving around the Bitcoin halving event, which was just a month away. With this push, Bitcoin hit an all-time high above $73,000 in mid-March.

The months following the event were mainly about Bitcoin’s consolidation, as it remained range-bound in between $50,000 and $70,000 despite short term fluctuations. Except for a few temporary dips, Bitcoin has predominantly traded above $50,000 since the halving event.

As of August 22, 2024, Bitcoin is trading just a little over $60,000, with year-to-date returns of around 45%

The spot Bitcoin ETFs

Along with the rise of Bitcoin in 2024, the spot Bitcoin ETFs have also attracted regular inflows since their launch. All the ETFs currently hold assets worth over $48 billion under management, with the iShares Bitcoin Trust leading the table. As a result, the spot Bitcoin ETFs have also played a key role in the broad-based crypto rally of 2024.

A steady inflow of investments from institutional investors to the ETFs has also helped Bitcoin’s price to stabilise. These investors include hedge funds, banks, and even pension funds. In the US, the Stanford Blyth Fund, managed exclusively by students, has redirected 7% of its portfolio to the spot Bitcoin ETFs. These are only a few instances of how popular the spot Bitcoin ETFs have become.

The Bitcoin halving event of 2024

If you go back to Bitcoin’s price chart, you’d notice that Bitcoin hasn’t seen a major price jump after the halving event and has only consolidated. This could have happened due to many factors: 

• First, after several halving events in the past, traders and investors have witnessed predictable trends around it. Hence, just a cut in the supply of BTC might not be enough to sustain a long rally. The halving event in 2024 has brought about volatility in the market along expected lines, but it has been within a fixed range.
• Previously, Bitcoin’s price had rallied immediately post each halving event. However, this year’s halving event is relatively different as Bitcoin’s price significantly moved up only prior to the event driven by the spot Bitcoin ETFs. The period post the event has been marked as a consolidation phase.
• Second, macroeconomic factors may have also influenced Bitcoin’s price movements. A combination of geopolitical and global financial elements has had a role to play in the crypto market, which could have negated any gains from Bitcoin’s supply being reduced.

Moreover, the costs of Bitcoin miners have also increased after the halving event. Theoretically, Bitcoin miners would have to mine the double to earn the same revenue as earlier, leading to higher costs. Reports in crypto news platforms have described how Bitcoin’s price needs to stay above $80,000 for Bitcoin miners to be profitable henceforth. Needless to say, JP Morgan analysts have stated how the profits of Bitcoin miners have fallen this year.

The final reflection

Despite the absence of a sharp rally in Bitcoin after the halving event, the crypto community is still bullish. A few positive factors have emerged, which includes the rise of long-term BTC holders. Coupled with Bitcoin’s use case as a hedge to inflation and a store of value, further rallies could be seen in the near future. At the same time the rise in institutional investors and the approvals of the spot crypto ETFs signals to a maturing crypto market.

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