Bitcoin: the relationship between halving and price

In the spring of 2024, the next halving of Bitcoin will take place: what will be the impact on the price of BTC?

So far, there have already been three halvings, and in all cases, the price of Bitcoin rose the following year.

The last three halves

The first halving occurred in November 2012, or just under four years after Bitcoin mining began on January 3, 2009, with the creation of the first block.

At the time, Bitcoin was worth around $13, and the following year saw the first and largest speculative bubble ever in the price of BTC.

In fact, within a year the price shot to a peak of $1,100, or an 8,300 percent gain in less than twelve months.

It must be said that the first halving brought down the inflation rate of Bitcoin’s money supply.

All BTC in existence was created as a reward for miners validating blocks, and originally that reward was 50 BTC per block.

With a block every 10 minutes or so, around 2.6 million bitcoins were created annually, and since only 8 million BTC had been created by the end of 2011, the annual inflation rate of the Bitcoin money supply was 32 percent.

With the first halving, the creation of new BTC dropped to 1.3 million per year, and since then by the end of 2012, BTC creation had risen to 10.6 million, and the inflation rate of the Bitcoin money supply suddenly dropped to 12 percent.

Such a sudden collapse almost instantly reduced the supply of BTC in the market, triggering a price surge due to relatively constant demand, which from January 2013 to November of that year generated the incredible percentage gain.

It is no coincidence that a large speculative bubble also burst the year after the second halving.

The second halving

The second halving occurred in July 2016, but it did not immediately trigger growth.

At that time, the premium for miners rose from 25 to 12.5 BTC per block, bringing the number of new BTC minted each year to 650,000. Since by the end of 2016 a total of around 16 million BTC had already been created, the annual inflation rate collapsed for Bitcoin’s money supply to 4 percent.

The price started to rise in October of the same year and then rose especially from April 2017.

During that year, the price reached $20,000, then a 1,700 percent gain from its previous peak in 2013.

The third halving

The third and final halving occurred in May 2020, when the reward for miners was raised to 6.25 BTC per block.

So since then, just under 330,000 new BTC are created every year, and since 18.5 million Bitcoins had already been created by the end of 2020, the annual inflation rate of the money supply fell below 2 percent.

In November of the same year, the price started to rise, and already the following month the last big bubble started to form.

However, this brought the price of Bitcoin to just under $70,000 in November 2021, or a gain of only 250 percent from the previous peak.

Bitcoin’s next halving and price predictions.

Since a halving happens automatically every exactly 210,000 blocks, and since 840,000 blocks is just under 60,000 blocks away, with a block mined every 10 minutes or so, it is estimated that the next halving will happen in the spring of 2024.

At that point, there will be more than 20.3 Bitcoins created, and the reduction to 160,000 new BTC created each year will bring the annual inflation rate of the Bitcoin money supply below 1 percent.

So this will not be a real collapse, like the one that happened in 12% that suddenly brought this inflation rate from 32% to 12%, but a much smaller reduction that will bring it from less than 2% to less than 1%.

Therefore, it is unlikely that the halving in 2024 will immediately have a large impact on the price of BTC, i.e. already in the spring or summer of the same year, because it will not reduce the supply in the market much.

Moreover, all three halvings that have already taken place have caused the price of Bitcoin to rise less and less, from +8,300% to +1,700% to +250%.

It is by no means impossible that in 2024 or 2025 the price of Bitcoin could increase, but it is unlikely that it will increase by those percentages.

It should also be mentioned that in recent years, other cryptocurrencies have drained capital from the crypto markets, which were once mainly concentrated on Bitcoin, so all the more reason why the increase may be less, or even not there at all.