The upcoming bitcoin halving event is set to take place on Saturday, a phenomenon that occurs every four years and is expected to provide a boost to bitcoin prices that have been stagnant in recent weeks. This halving event refers to the 50% reduction in the new bitcoins available daily to digital miners who unlock tokens on the blockchain through a complex process. It is programmed into the bitcoin ecosystem to occur every four years, with the fourth halving event expected to occur soon, reducing the amount of bitcoins available for mining each day from 900 to 450.
Currently, between 19 million and 20 million bitcoins exist, with only 21 million tokens programmed to exist. The purpose of halving events is to keep the supply of bitcoin limited and maintain the decentralized currency’s value. By lowering the supply, it is expected that the 2024 halving will drive demand for bitcoin and, subsequently, its price, as has been observed in the aftermath of the three previous halving events. In the 12 months following the 2012 halving, bitcoin rose by 8,069%, by 284% after the 2016 halving, and by 559% following the 2020 halving. This trend suggests a positive outlook for bitcoin prices in the upcoming halving cycle.
However, it is important to note that the increase in demand for bitcoin is not guaranteed, and there is uncertainty regarding how bitcoin prices will behave during this halving cycle. Some critics argue that bitcoin is already overvalued considering its limited use cases. Despite this skepticism, bitcoin has seen significant market-beating returns in recent years, with its price reaching $61,000 per token on Wednesday, seven times higher than its 2020 price, 90 times higher than its 2016 level, and 4,000 times higher than its 2012 level. The current price of bitcoin is about 17% below its all-time high of $73,768 set last month.
One factor contributing to the recent dip in bitcoin prices is the flash crash that occurred on Saturday as Iran launched a drone attack on Israel, highlighting the volatile nature of the cryptocurrency market. Analysts suggest that new demand catalysts overlapping with previous halvings have helped drive price increases, with the approval of spot bitcoin exchange-traded funds in January unlocking billions of dollars of new capital into bitcoin. This has led to bitcoin being up nearly 300% since the beginning of last year. Overall, there are mixed opinions on how bitcoin prices will perform in the coming months, with some analysts predicting a potential increase to $150,000 next year.
While halvings may benefit bitcoin holders, they pose a challenge for miners as it cuts their potential revenue stream in half. This pressure has caused some publicly traded American bitcoin miners, such as CleanSpark, Marathon Digital, and Riot Platforms, to underperform compared to bitcoin this year. However, analysts see the halving as a positive force for investors as it may lead to consolidation and the emergence of more profitable companies in the industry. In conclusion, the upcoming bitcoin halving event holds the potential for significant changes in the cryptocurrency market, impacting both miners and investors alike.
