The rewards for mining Bitcoin are about to be chopped in half for miners in a scheduled event called “the halving.” This anti-inflationary measure is predicted to occur on or about April 17, 2024.
Though it won’t be the first such halving event, the crypto world is poised to enter the unknown, as recent all-time highs in price and a somewhat crowded mining landscape bring mystery and suspense to what could become one of the most important days in cryptocurrency history.
The months leading up to the halving have seen the approval of the first-ever spot Bitcoin exchange-traded funds in the United States as well as a new all-time-high Bitcoin (BTC) price of $73,679 set on March 13, 2024. Whether the price will deflate, rocket or maintain after the April halving event is anyone’s guess — there are no guarantees. But if the past is any indicator of the future, previous halving events can be studied to get an idea of how this year’s could play out.
Bitcoin block number one was mined with a reward of 50 BTC on Jan. 3, 2009. The first halving event occurred on Nov. 28, 2012, and reduced that reward to 25 BTC per block. At the time, BTC was sitting at $12.20.
Quick fact: If one had spent $100 on BTC the day of the first halving, they’d have snagged 8.9 BTC. Then, if they had managed to hold their coins until March 13, 2024, when BTC reached its most recent all-time high, the $100 investment would have been worth $655,743.
After the first halving, the price of BTC shot up from $12.20 to around $1,000 by the end of 2023.
The second halving event happened on July 9, 2016. This brought the reward for mining a single block to 12.5 BTC. At the time, Bitcoin was valued at around $640. By July 2017, it had risen to $2,550.
May 11, 2020, brought the third and most recent halving event. Bitcoin mining rewards were reduced to 6.25 BTC per block and traded for about $8,750 at the time. Within a year, Bitcoin reached an all-time high of approximately $62,000.
With this year’s halving set to happen in mid-April, both the price of BTC and speculation surrounding the event have reached all-time highs. Analysts are predicting everything from around $75,000 just after the halving occurs to $250,000 or more within about a year of the halving.
As history has shown, the price of BTC has typically skyrocketed over the next year after halving events, but some drawbacks and recessions have occurred in the months between the date of the halving and upward momentum.
It’s important to note that predictions concerning market movements are just that — predictions. Nobody knows for sure whether Bitcoin will fall, moon or stabilize after the halving. However, history has seemingly favored the bold, with all-time highs tending to follow halving events.
Aside from concerns over price, there are unanswered questions surrounding network security in the post-halving world.
At the far end of the spectrum, there are potential security risks involved in the halving due to the potential for smaller miners to be forced out of the scene. With rewards slated to be reduced by 50%, those miners operating at the edge of profitability/loss could find themselves staked out of the rewards spectrum and seeking a sell-off or unaided exit.
It’s possible a transient flux of mining availability could cause ripples throughout the Bitcoin network that reduce hash rates and lower overall security.
However, on the other end of the spectrum, previous halving events have had almost no discernible effect on overall network security, and many analysts are predicting smooth sailing for the network itself.