Is Bitcoin in store for a much greater upside by 2024?
- The 2024 Bitcoin halving will halve mining rewards, affecting Bitcoin’s supply and potentially influencing its market value based on historical price increases post-halving.
- Previous halvings, particularly in 2020, have led to significant price surges in Bitcoin, though market reactions can be varied and influenced by external factors like the COVID-19 pandemic.
- Predictions for the 2024 halving range from highly optimistic to conservative, considering factors like market sentiment, institutional investment, and the increasing challenges of Bitcoin mining.
By early-to-mid 2024, Bitcoin (BTC) mining rewards will be cut in half once more in an event commonly known as the “Bitcoin halving.” What does this mean? What implications does it have for the cryptocurrency market? And what should you expect as it happens?
In this deep dive, we will tell you everything you need to know about Bitcoin halving. We will also give you an overview of the things to anticipate about the event based on previous occurrences.
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What is “Bitcoin Halving”?
Bitcoin’s supply is finite. And at its maximum, there will only ever be 21 million Bitcoins in circulation as it is capped at that volume. There are already around 19.5 million Bitcoins in circulation as of this writing. This means that a lot of Bitcoins are still not changing hands yet. They have to be “mined” first before they finally enter the supply.
Mining is done by validating or confirming transactions before they are recorded on the blockchain. To do this, miners compete against each other in solving a mathematical problem. The first one to solve it gets the BTC reward. This process is based on the “Proof-of-Work” model.
However, the reward is designed to be cut in half over time in an event called the “halving.” Every time the mining height reaches 210,000 blocks (or after 210,000 blocks have been mined), the mining reward is halved. Bitcoin began with a mining reward of 50 BTC back in 2009. Then, it was halved to 25 BTC in November 2012, halved to 12.5 BTC in 2016, and then recently, halved to 6.25 BTC in 2020.
The next halving event is expected in 2024 when BTC rewards will fall to 3.125. Some estimates suggest that by 2140, all Bitcoins will have been issued to miners and no new coins will enter the supply.
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What Happened in the Previous Halving Events?
BTC’s price history indicates that halving events bring significantly positive price movements for the coin. During the first halving in November 2012, BTC was just valued at $12. After only six months, BTC shot up to $130, marking an increase of around 980% in a very short span of time.
On the second halving in 2016, BTC hovered at around $660. Six months later, in January 2017, BTC went up to $900, marking up to 36% of growth.
Then, the third halving in 2020 happened. BTC stood at around $8,600 before it more than tripled its price to an all-time high of over $28,000 by the end of 2020.
Halving events are viewed positively by the market because of the effect it has brought on BTC historically. If the trend is to continue, we can anticipate significant price movements for BTC in a few months following the halving. Nevertheless, be careful and remember that every asset’s historical price trend does not completely guarantee its future valuation.
The Bitcoin Halving of 2020
In anticipation of the halving event in 2020, analysts threw around incredibly bullish forecasts for BTC. Some were as far up as $90,000. These predictions were expected to throw more positive market sentiment on the cryptocurrency. Unfortunately, the market did not exactly deliver as expected by some.
The halving event in 2020 proved to be somewhat anticlimactic. That was because, for a while, BTC hovered at only around $9,000. Nevertheless, it was somehow expected because most of the markets at the time were also reeling from the impact of the COVID-19 pandemic. It took a while before BTC reached its 2020 peak at $28,000.
Eventually, the surge in BTC’s price brought more attention to the cryptocurrency market. Some analysts even started painting BTC as a “safe haven” as U.S. stocks tumbled. Jeff Dorman, the Chief Investment Officer of Arca Funds, told CoinDesk that he doesn’t “expect bitcoin to trade as risk-on or risk-off asset.” He adds that “anything that’s inflationary” only “strengthens the purchasing power of bitcoin.”
As all this was happening, the decentralized finance (DeFi) movement gained momentum. While it veered away some of the attention from BTC, it still emphasized its role as a hedge against traditional financial systems and central bank policies. Some analysts believe that it contributed to BTC skyrocketing in value later that year.
What to Expect in the 2024 Halving
Predictions suggest that there is a likelihood for BTC to paint new all-time highs. BitQuant, one of the prominent crypto trading firms, predicts that BTC could set a new all-time high even before the halving event. Post-halving, BitQuant believes that BTC could reach $250,000. Standard Chartered predicts a $100,000 price target for BTC by the end of 2024.
Some other predictions are less bullish, but optimistic nonetheless. Coincodex forecast says that the rally could drive BTC to around $84,100 post-halving. Bloomberg reports, on the other hand, feature analysts offering a more conservative prediction of around $50,000 by 2024.
Others are not necessarily bullish on the next halving event, however. Ahmed Ismail of FluidAI believes that halving might not be the primary catalyst for more BTC upside in the future. According to Ismail, the halving event might already be priced into the BTC market.
Moreover, miners are in store for an increasing challenge in operations. The rising difficulty in BTC mining can potentially put more miners out of business as it becomes less profitable, only earning them 3.125 BTC for block rewards.
Predictions are also dependent on overall market sentiment. Institutional investments are also important for the growth of BTC, which is one of the primary entry points for money flow into the crypto market. If more DeFi developments happen and more use cases for cryptocurrencies are found, bullish predictions are likelier to be accurate.
What Do You Think Will Happen?
While there is a consensus that the 2024 Bitcoin halving will impact prices and market dynamics, opinions on the nature and extent of this impact vary widely. Some predict substantial price increases, while others caution that the effects might already be factored into current prices. The impact on miners and the broader crypto market will also be significant, reflecting the evolving nature of the cryptocurrency ecosystem.
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