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Will the Bitcoin Halving Cause BTC Price to Explode?

By Evan Jones02/26/2024

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The Bitcoin halving is fast approaching, with sites like CoinMarketCap even featuring a countdown clock until the event. Very quickly, the Bitcoin halving is an event wherein the amount of Bitcoin that is being mined and put into circulation is cut in half. It happens about every four years, with the last one being in 2019. 

The halving is considered by many to be a momentous occasion for Bitcoin every time it happens, as it should affect its price in a positive manner seeing as it is a deflationary event. There are those who expect Bitcoin’s price to explode due to the halving, and those who don’t, and in this article we’re going to explore both sides of the argument before taking a look at Bitcoin’s historical price action surrounding previous halving events. 

Let’s start with the argument for. 

Argument for Bitcoin Price Explosion

Theoretically, the Bitcoin halving event should always result in Bitcoin’s price increasing in the aftermath. Of course, there are a variety of other factors that are always affecting Bitcoin’s price, but the mining side of it is certainly important, as miners are the ones processing transactions and earning mining rewards. 

With the halving, miners will receive half of the rewards they were receiving before. This affects all sorts of margins, including hardware costs, electricity, and more. Overall, this also means that Bitcoin is more scarce, as only half of what was previously coming to market as new Bitcoin will now be available. 

In between there being less Bitcoin coming to market, a reduced rewards for miners, and the general deflationary nature of Bitcoin, the halving should then cause Bitcoin’s price to jump up. Miners are less likely to sell their now reduced rewards unless the price of Bitcoin isn’t sufficient to cover their mining costs, while regular investors have less Bitcoin available on the open market as miners’ sell less and there is less being mined. This should create a supply constraint, increasing Bitcoin’s price significantly as more and more halvings occur. 

Argument Against Bitcoin Price Explosion

Now, there are many who have always believed that because the halving is a known occurrence, the event is already priced into BTC before it ever happens. Those in this camp are likely to not expect Bitcoin’s price to do much when the halving occurs, and are perhaps pessimistic about its effect on Bitcoin. 

As aforementioned, the price of Bitcoin is a significant factor when it comes to the halving and what could happen on the other side of it. If Bitcoin’s price struggles to maintain a level where miners are still able to be profitable, then the price will likely have trouble staying anywhere high as miners sell off their rewards to cover costs. 

This, if true for all scales of mining companies, would be an absolute disaster for Bitcoin. However, it’s more likely that only smaller scale mining companies would face this sort of issue, leading to a situation where the strong survive. 

Bitcoin’s Historical Halving Price Action

This next halving will be the fourth in the history of the Bitcoin blockchain. 

The first halving happened on November 18, 2012, and the block reward went from 50 Bitcoin down to 25 per block. Leading up to the event, BTC was trading around $12 per BTC. One year later, BTC was trading at over $500 USD per BTC, and even got to as high as $1k per in December 2013.

It halved again on July 9, 2016, reducing the block reward to 12.5 Bitcoin. At this time, BTC was trading back around $650 USD per BTC. By July 11, 2017, BTC was trading at over $2.3k USD per. It closed the year at over $15k USD per Bitcoin.

On May 11, 2020, the reward went down again to 6.25 Bitcoin per block. Leading into this halving, Bitcoin was trading at around $9k USD per BTC. One year later, on May 20, 2021, Bitcoin was trading at about $50k USD per BTC, having hit what was an all-time high over about $63k USD a month earlier. 

When the reward is halved in April 2024, it will result in a reward of 3.125 BTC per block. What price it will be trading at in April 2025 is anyone’s guess. But, if you look at the historical data, you can see the trend. Yes, it might drop after the event, or even leading into it, but when you come back and check its price compared to the last halving, it’s always in the green comparatively. 

Closing Thoughts

Heading into the latest halving event, Bitcoin will likely be trading close to what it was after it corrected when it hit all-time highs in 2021, at $40k or so. This is also where it is already currently trading, which is a good thing if you look at the previous section regarding Bitcoin’s price action going into the halving event and one year after it. 

Though there is certainly an argument against Bitcoin’s price exploding because of the halving, historical data says that the argument tends to fall on deaf ears.

Article tags

Beginner
bitcoin
investing
Evan Jones

Author

Evan entered the crypto scene in 2017, attracted to the many disruptive possibilities that blockchain could have on current world systems. He has a keen interest in decentralized services, payment processing, and viable NFT use cases such as event ticketing. He spends his days writing with his dog Kobe under his feet, if not on his lap.

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