BTC Halving 2024 Approaches - The Next Possible Bull Market Catalyst?
The next BTC halving will occur in 6 months. Halving usually brings positive sentiment and hope. Can it uplift the current bear market? Unpack its broad impact in this article.
TL;DR:
- Bitcoin halvings occur roughly every 4 years and mark an important slashing of block rewards in half - effectively slowing the rate of issuance of new BTC.
- Historically the months after BTC halving were associated with increased volatility and the start of a new bull market.
- The 4th Bitcoin halving will occur sometime around April 2024, reducing the rewards for miners from 6.25 to 3.125 per block.
- This “supply shock” could lead to a BTC price increase, granted that the demand stays strong. Bitcoin halvings are also psychological milestones of crypto market cycles.
Why is BTC Halving a Holy Grail of the Crypto Market?
Every four years, the reward for mining a new Bitcoin block is slashed in half, in an event colloquially known as the "halving". This mechanism was embedded into Bitcoin's code by its mysterious creator, Satoshi Nakamoto, to ensure that the cryptocurrency remains scarce and deflationary.
At its inception in 2009, miners were rewarded with 50 BTC for every block they mined. After the first halving in 2012, this reward was halved to 25 BTC, then 12.5 BTC in 2016, and 6.25 BTC in 2020. The upcoming 2024 halving will see this reward drop to 3.125 BTC.
The halving is essential for two primary reasons:
- Controlled Supply: It ensures that new BTC is introduced into the market at a decreasing rate. Since there's a hard cap of 21 million BTC that will ever exist, the halving events prolong the time until the last Bitcoin is mined, projected to be around the year 2140.
- Economic Implications: A reduced supply often leads to increased demand, especially if adoption and popularity continue to rise. In the past, halving events have historically been linked with significant price surges in the months that follow.
Bitcoin and Previous Bull Markets
So far Bitcoin has undergone 3 halvings, each followed by a period of rapid growth. After the first halving in November 2012, the first crypto bull market was born. Back then the price went from $9 per BTC all the way to $1250, which is a return of more than 13000%. Of course, in 2012 the price of BTC was far easier to manipulate because of its lower market capitalization.
The following halvings in 2016 and 2020 also marked significant price actions for Bitcoin and the overall crypto market. After the first cycle, there were already some expectations as to what came next. Psychology, speculation, and greed therefore played a big part.
Apart from Bitcoin, during each cycle emerges a new wave of projects (altcoins) that seek to create novel solutions and applications. Traditionally these projects have a short life cycle consisting of rapid growth and even faster crash - ideal conditions for a quick speculation. In the bull market from 2015 to 2017, the new narrative were ICOs (Initial Coin Offerings).
Similarly, NFTs and DeFi were the main attractions of the 2020 to 2021 bull market. While Bitcoin is rarely the sole star of bull markets, its halving is often just the right catalyst to set a new period of positive sentiment and growth.
What to Expect in 2024?
The crypto community is eagerly awaiting each halving. Although we have yet to determine the exact time, the next one is supposed to happen sometime between March and May 2024. As mentioned earlier, the block reward for mining BTC will decrease to 3.125 BTC.
With smaller block rewards, the BTC circulating supply will be inflated 2x slower, which means the price per BTC increases if the demand stays strong. At this time it is difficult to predict exactly how the market will react to the next halving, however judging from historical data, the future looks rather optimistic.
The months after each halving, most of all marked a period of increased volatility - we should not blindly assume that directly after halving the price of BTC will skyrocket. This volatility provides a fertile ground for both positive and negative influences to play out.
Optimistic Scenario
Let's go over what an ideal case could look like. We will assume that until the next halving, the price continues to fluctuate between $20K and $30K. According to the BlockWare 2024 Halving Analysis, the BTC supply after halving will diminish, reducing the selling pressure from miners. The demand side should also be covered, as many market participants understand this supply dynamics and are ready to deploy capital on the first sign of upward momentum.
This upward momentum could bring Bitcoin into the focus of the general public and mass media, further facilitating growth. The rest of the crypto market will follow, generating new narratives and applications, similar to ICOs in 2016 or NFTs/DeFi in 2020.
Indicators to watch:
Neutral to Pessimistic Scenario
It is also important to review a more down-to-earth possibility of the development following Bitcoin halving in 2024. One of the main arguments for the lukewarm future development is that each successive halving has had a diminished percentage impact on Bitcoin's price. With more halvings, the reduction in supply becomes less significant.
By 2024, the majority of all Bitcoins (over 90%) will already be in circulation. As such, the supply shock may not be as influential as in previous cycles.
The Bottom Line
As we approach the 2024 halving, it's essential to remember the historical significance and potential market implications these events have brought. However, in a rapidly evolving and maturing market, past patterns don't always guarantee future outcomes.
While halvings have traditionally spurred bullish momentum, a myriad of factors, including regulatory landscapes, global economic conditions, and advancements in crypto technology, can shape the post-halving trajectory. As always, informed, cautious, and diversified strategies are the keystones to approaching such pivotal moments in the crypto timeline.
