Bitcoin Halving 2024: Price Implications, Market Dynamics, and Historical Context

Bitcoin Halving 2024: Price Implications, Market Dynamics, and Historical Context
Feb. 27, 2024 Finance

April 2024 is said to be the tipping point for the price of the coin and to some extent affect the market because of the upcoming halving event for Bitcoin. As a rule of thumb, this event normally happens approximately every four years and halves remuneration to miners from 6.25 to 3.125 bitcoin. This will lessen new bitcoins being introduced into the market.

We have seen quite remarkable price movements in Bitcoin ahead of this event, which in the last two months had appreciated a lot, especially from January 23rd when the price was around $38,555.00 to increase to approximately $57,000 during the Asian session, February 27th—up about 48% within an extremely short time frame. That is a simple trend showing exactly the volatility and rapid change in value that are commonly termed in the crypto market.

The market has continued to exhibit massive activity for the week, ticking up towards the November 10, 2021, all-time high at $69K for Bitcoin, reflective of the speculative nature surrounding the halving event and its potential impact on prices.

A few scenarios one could look forward to as possibilities post the April 2024 halving are the following:

BTC Rally into Halving: Expect enhanced buying and speculative stakes to push BTC prices higher in the run-up to the halving. In this case, if US inflation data continues to add bullish pressures on risk assets and USD, this upbeat sentiment is most likely to weigh over any near-term pullbacks.

Short-term "Buy the Rumor, Sell the News" Play: Traders may have an opportunity to buy into the exuberant hype leading up to the halving and then sell their positions afterwards in a profit-taking move.

Bearish Pullback on USD Firming Up: In case money starts returning towards the perceived safer heavens of fiat currencies amid a strengthening dollar environment, Bitcoin may come under pressure from short-covering, triggering a pullback.

Rally Back into All-Time Highs (ATHs): In a situation when the market dynamics are such that the reduced supply following the halving makes a big impact while demand stays just as firm, then Bitcoin indeed could rally back into its ATHs.

Pullback From ATHs: However, after reaching ATHs, a more likely alternative seems to be a pullback, but it probably partly depends on interest rate policy decisions in general on USD strength.

While all is transparent, the task for both investors and traders consists of being able to "ride the waves" without being surprised by the unexpected market reversals. All this evidence makes the relationship quite blurred every time between the speculation on supply and demand dynamics and macroeconomic factors in the world of cryptocurrencies.

The upcoming halving will therefore be closely monitored with respect to the historical event of previous halvings that seem to appreciate Bitcoin values over time. On the flip side, it is important to remember that the price of any given cryptocurrency is extremely volatile and random, so diligence in research and risk control must be observed by market participants as holders and/or traders around such an event.

Therefore, inculcating further details in regard to Bitcoin halving would allow further exploration of the impacts and events happening within a precise historical scenario as follows:

Upcoming Bitcoin Halving

This is expected to occur once again on April 2024, by which time the Bitcoin blockchain will have reached 740,000 in terms of block count. This, in turn, will reduce the block reward from 6.25 to 3.125 bitcoins. As a result of the naturally occurring differences experienced with this process, the halving timing operates within a very high level of variability limit as the Bitcoin network history has proven to yield one block every ten minutes.

Histories of Bitcoin Halvings

These are the main events of bitcoin that take place after every 210,000 blocks, when there occurs a reduction of the rate at which new units of this crypto are created. It does so by reducing the block reward issued to transaction processors by half. This mechanism is part of the deflationary economics intended for Bitcoin to mimic the scarcity and preserve value similar to precious metals like gold. This is a highlight from past and upcoming halvings, which make it play a role in showing its relevance:

Bitcoin Release: The genesis block (block 0) of bitcoin was mined on 3 January 2009, with 50 BTC in reward per block, leading to a total of 10,500,000 BTC mines until the first halving.

First Halving: The halving first occurred on November 28th, 2012, at block height 210,000, after which the reward was reduced by half of what it was during the first release- that is, 25 BTC; then another 5,250,000 BTC were mined up to the next halving.

Second Halving: The second halving took place on the 9th of July in the year 2016. It left the reward at 12.5 BTC, reduced by half. In this case, a total of 2,625,000 BTC had been mined after the second halving and before the third. 

Third Halving: It happened on the 11th day of May in the year 2020, at block number 630,000, further reducing the reward to 6.25 BTC. This added 1,312,500 BTC to the total supply up to when a fourth hal

Fourth Halving: Projected around April 2024 at block 740,000, the reward is going to be 3.125 BTC, which essentially implies that an expected 656,250 BTC would have been mined until the time of the fifth halving. Fifth Halving: Estimated to occur in 2028 at block 850,000, it reduces by half to 1.5625 BTC again, adding a bit over 328,125 BTC to the blockchain.

In fact, each of them will create 210,000 blocks, with the process not stopping until around 2140, so that all 21 million bitcoins—the full completion of the currency's schedule—would have been mined.

The next one due in April 2024 is perhaps the most fascinating. It not only exhibits a tremendous reduction in the supply of new Bitcoin issuance, but it also marks the midpoint that could impact the important price of Bitcoin, mining profitability, and many other dynamics within the cryptocurrency market. Generally, halving events have had rapid price accelerations occurring in the months surrounding the event. This, of course, is also no prediction based on precedent.

Besides, new supplies of Bitcoins are declining, while the demand from large buyers is rising due to an increasing number of big investors buying into its potential. Things could also get worse mid-May for its biggest demand source when something called "the halving" occurs—a deliberate cutting of future supply. Yet these are speculations, and the real character of their impact can only be gauged from the interplay of technology, regulation, and macroeconomic phenomena, among other things.

And this halving is, therefore, among such big market events that serious investors right around the globe will be paying very close attention and most probably have already pre-planned just how to take the best strategic advantage, given all possibilities for severe volatility. Be that as it may, around such crucial events as a Bitcoin halving, it is highly advised to act and carry out due diligence with a previously predetermined investment strategy.

Disclaimer: This is compiled for reading and learning purposes. Readers are informed that dealing or trading in such currencies in Nepal is illegal. This publication does not intend at stimulating or inciting any criminal activities connected with trading or transacting cryptocurrencies within the jurisdiction of Nepal.