Everything You Need To Know About The 2024 Bitcoin Halving

Over the last few years, Bitcoin (BTC) has garnered mainstream acceptance by major Wall Street institutions and continues to attract curious retail investors with each halving cycle. Crypto market observers will be monitoring the upcoming halving with great interest and scrutiny, recognizing its significance for the crypto industry going forward.

The halving takes place on the Bitcoin Network approximately every four years, reducing the supply of the cryptocurrency by half to create a scarcity effect and combat inflation, likening it to digital gold. Historically, it signals the start of a new cycle and bull market, but this time around, there are some unique aspects.

Supply And Demand

Bitcoin has historically experienced substantial price increases following previous halvings in 2012, 2016, and 2020, with gains of approximately 93x, 30x, and 8x, respectively. However, some caution that the days of such significant impacts on the price due to halvings may be waning as the supply diminishes every four years.

Nevertheless, Steven Lubka, head of private clients and family offices at Swan Bitcoin, suggests that this year might warrant a more optimistic outlook for post-halving returns, especially given the accelerated start of the Bitcoin bull cycle due to the approval of spot ETFs in January. In fact, many experts believe that this Bitcoin bull cycle may very well be shorter and more explosive by comparison, reaching its peak in late 2024 or early 2025.

Traditionally, whale demand for Bitcoin has spiked following each halving, driving prices upward. However, this year, whale demand, comprising original Bitcoin enthusiasts, new investors, and BTC ETF holders, is at an all-time high even before the block reward reduction.

Impact On Miners

The halving occurs when incentives for BTC miners are halved, approximately every 210,000 blocks or four years, as dictated by the code of the Bitcoin blockchain. These miners, who validate and record new blocks of Bitcoin transactions on the blockchain by solving complex mathematical problems, have two main incentives, namely transaction fees paid by senders for faster processing and mining rewards, currently 6.25 BTC, or roughly $437,500.

Sometime between April 18th and April 21st, the mining rewards will decrease to 3.125 BTC. This reduction in block rewards decreases the supply of BTC by slowing down the creation of new Bitcoins, reinforcing the concept of the crypto as digital gold with a finite supply, ultimately capped at 21 million BTC as per the Bitcoin code.

Lastly, the key aspect investors need to grasp about the halving and its potential market impact is that miners regularly sell a significant portion of the Bitcoin they earn to cover operational expenses.