What is Bitcoin halving? What is the relationship between halving and price increase? What were the price increases in previous halvings?
The next Bitcoin halving is expected to occur in April 2024. Since the halving depends on block height, it is not possible to share an exact date. However, the halving occurs every 210 thousand blocks. The next Bitcoin halving is expected to occur when the block height reaches 840 thousand. According to estimates, this brings the date to April 16 or 17, 2024.
What is Bitcoin halving?
For those who do not know, it is useful to share what the Bitcoin halving is. Bitcoin’s coin supply has a limit of 21 million. Bitcoin halving is a mechanism written into the algorithm of the Bitcoin blockchain to control the supply of this coin. In Bitcoin halvings, the reward for mining Bitcoin is halved. In this sense, Bitcoin miners receive 50% less bitcoin to verify transactions.
Bitcoin halvings are planned to occur after every 210 thousand blocks mined until the entire maximum supply of bitcoin is released. Thus, we can say that this action occurs approximately every four years. Bitcoin’s previous halvings took place in November 2012, July 2016, and May 2020.
Relationship between halving and price increase
If we need to give examples from past halvings, let’s first go to 2020. During this period, 12.5 new Bitcoins were added to the network every 10 minutes through mining. In May 2020, this amount was halved. Thus, 6.25 new Bitcoins were added to the network every 10 minutes.
When we look at historical data, we see that Bitcoin BTCUSD tends to increase in price in the months after the halvings. Considering that there are only 21 million Bitcoins, we can say that the halving makes Bitcoin increasingly rare as it reduces the number of Bitcoins. This rarity, combined with the increase in demand, causes an upward movement in the market.
Price movements related to previous halvings also support this. According to the report shared by Coinbase; Bitcoin gained an average of 61% in value in the six months before previous halvings and rose an average of 348% in the six months after the halving. However, when the report examines these figures more deeply, it is stated that not all halvings reveal equal dynamics.
The fact that Bitcoin has recently come to the fore with serious price increases almost supports Coinbase’s data. In February 2024, Bitcoin reached $60 thousand again after 3 years and managed to exceed the all-time high level (ATH) in a short time.
What were the price increases in previous halvings?
Bitcoin, which was traded with an increase of 139% in the six months before the first halving, rose 923% in the six months after the halving. On the other hand, it is important to note that Bitcoin was trading at just over $5 six months before this halving. Bitcoin, which was still in its early stages at that time, did not show a similar strong performance in subsequent halvings.
For this, it is enough to look at the second halving. We can say that the performance decreased slightly in the second halving. Bitcoin increased by 46% in the six months leading up to the halving and by 37% in the six months following the halving.
The third Bitcoin halving appeared with more modest metrics compared to the others. Bitcoin, which dropped 2% in the six months before the halving, gained 82% in value in the next six months.
The Coinbase report also includes on-chain measurements. Pointing out that Bitcoin has completed four market cycles since its emergence in 2009, the report states that the current cycle is most similar to the period between 2018 and 2022. It is worth noting that during this period, Bitcoin gained 500% in value from the cycle low.
So far, just over 19 million Bitcoins have been added to the network through mining. This leaves approximately less than 2 million Bitcoins left. The last halving is expected to occur in 2140. We will all watch and see what impact the halving that will take place next month will have on the market.
Source: Webrazzi / Prepared by Irem Yildiz