Key Points
- The Bitcoin community celebrates the Bitcoin halving every four years, which has historically had a bullish impact on the cryptocurrency market.
- The halving affects the Bitcoin price, miners’ resilience, and has a speculative impact, with the last Bitcoin projected to be mined around 2140.
The cryptocurrency community eagerly anticipates the quadrennial event of Bitcoin (BTC) halving. This event is considered a significant milestone due to its traditionally positive effect on the overall cryptocurrency market. As we approach the fourth Bitcoin halving on April 19, let’s explore five intriguing aspects of this event that even experienced crypto enthusiasts might not be aware of.
Bitcoin Price Increases Post-Halving
Bitcoin’s price has historically risen following a halving, largely dependent on supply and demand equilibrium. After the first halving on November 28, 2012, Bitcoin’s price escalated from $11 to a record high of $1,240 a year later. Similarly, the second halving in July 2016 saw Bitcoin’s price increase from approximately $650 to an all-time high of $20,000 in December 2017.
Following the third halving in May 2020, Bitcoin’s price surged from around $8,8000 to $69,000 in November 2021. Therefore, Bitcoin’s returns since the first halving are an impressive 650,000%. Various factors have stimulated Bitcoin demand after its halving events. For example, a generally dovish approach by global central banks significantly contributed to Bitcoin’s price rally during 2020-2021.
Halvings Challenge Miners’ Economic Resilience
Each halving decreases the income miners earn for verifying transactions, making profitability more difficult, particularly for those with higher operational costs. This situation forces miners to either upgrade to more efficient technology or cease operations. For instance, following the third Bitcoin halving in May 2020, the average cost to mine one BTC increased, as depicted by the blue wave in the chart. The rise in operational costs pushed smaller players out of the market, potentially increasing network centralization.
Pre-halving price rallies can be speculative. The anticipation of a Bitcoin halving often leads to speculative price increases. For instance, in the six months before the 2020 halving, Bitcoin’s price increased by over 40%, from around $7,000 in November 2019 to approximately $10,000 by May 2020. These gains are often driven by speculative investors hoping to capitalize on the post-halving price increase, reflecting historical patterns and leading to volatility.
The broader economic environment plays a crucial role in shaping the impact of Bitcoin halvings on its price. For example, the 2020 halving coincided with the period of loose monetary policies, including near-zero interest rates in the U.S. This unique situation contributed to Bitcoin’s appeal as a “digital gold,” helping its price to soar from around $8,000 at the time of the halving in May 2020 to an all-time high of nearly $69,000 by November 2021.
Thanks to the halving process, the final Bitcoin is projected to be mined around the year 2140. After the last halving, miners will no longer receive block rewards in new BTC but will rely solely on transaction fees for revenue. This shift could fundamentally change Bitcoin’s security and economic model, influencing everything from miner participation to transaction costs.