Bitcoin Halving 2024 – What You Need To Know – Forbes Advisor UK

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The available supply of conventional currencies rises and falls under the watchful eyes of national central banks, but the total supply of Bitcoin is fixed and unchanging.

There will only be 21 million Bitcoin. Currently, a little over 19 million have been mined, leaving just under 2 million to be created. The Bitcoin protocol automatically reduces the number of new coins issued with each new block in a process called halving.

One of the most important features of Bitcoin is its limited supply and issuance mechanism.

Bitcoin halving explained

The Bitcoin halving is when the reward for Bitcoin mining is cut in half. Halving occurs every four years.

The halving policy is written into Bitcoin’s mining algorithm which aims to counter inflation by maintaining scarcity. In theory, the reduction in the rate of Bitcoin issuance means that the price will rise if demand remains the same.

“Bitcoin’s production scarcity is what defines its finitude, and when reward drops, supply is limited,” said Chris Kline, COO of Bitcoin IRA.

How does Bitcoin halving work?

A decentralized network of validators verifies all Bitcoin transactions in a process called mining. They are paid 6.25 BTC when they are the first to use complex mathematics to add a group of transactions to the Bitcoin blockchain as part of its proof-of-work mechanism.

At the current Bitcoin price, 6.25 BTC is worth more than £300,000, a clear incentive for miners to keep adding blocks of Bitcoin transactions that run smoothly.

Bitcoin prices

Those blocks of transactions are added approximately every 10 minutes, and the Bitcoin code dictates that the reward for miners is cut in half after every 210,000 blocks are created. This happens approximately every four years in periods often accompanied by increased Bitcoin price volatility.

When was the first Bitcoin halving?

The first Bitcoin halving took place in November 2012. The next halving was in July 2016, and the most recent halving was in May 2020.

The reward, or subsidy, for mining started at 50 BTC per block when Bitcoin was released in 2009. The amount drops in half each time a new halving occurs. For example, after the first halving, the reward for Bitcoin mining dropped to 25 BTC per block.

The last halving will occur in 2140. At that point, there will be 21 million BTC in circulation and no more coins will be created. From there, miners will only be paid with transaction fees.

Richard Baker, CEO of miner and blockchain service provider TAAL Distributed Information Technologies, points out that miners may shift transaction processing power away from BTC once the next halving occurs as they seek more transaction fees elsewhere to make up for lost Bitcoin revenue.

Fewer miners will mean a less secure network, experts say.

On the other hand, while the halving reduces the reward for miners, it also reduces the supply of new coins without reducing demand, notes Patricia Trompeter, CEO of cryptocurrency miner Sphere 3D Corp.

“If the economic theory holds true, which historically for Bitcoin it has, Bitcoin prices should rise dramatically in response to the supply shock,” she says. “However, there is still debate as to whether the historical price movement around each halving was a direct product of the halving.”

Higher prices will be an incentive for miners to keep processing Bitcoin transactions.

History of Bitcoin Halvings

The number of new Bitcoins issued as a reward for miners adding a new block of validated transactions to the Bitcoin blockchain has halved every four years since 2009.

The initial reward was 50 BTC, which would be worth over £1,000,000 today. Currently the reward is 6.25BTC, equivalent to approximately £224,693.

Here’s how the reward has decreased every four years since Bitcoin started:

When is the next Bitcoin halving?

The Bitcoin algorithm determines that halving occurs based on a certain creation of blocks. At the current rate, the next halving is expected to occur on or around April 21, 2024.

The somewhat predictable nature of Bitcoin halvings is designed to not be a huge shock to the network, experts say.

But that doesn’t mean there won’t be a trading frenzy surrounding Bitcoin’s next halving.

“Historically, there is a lot of Bitcoin price volatility leading up to and following a halving event,” said Rob Chang, CEO of Gryphon Digital Mining, a private Bitcoin miner. “However, the price of Bitcoin usually ends up significantly higher a few months after.

While there are many other factors affecting Bitcoin’s price, halving events seem to be generally positive for the cryptocurrency after initial volatility has eased.

Baker says investors should be cautious about the next Bitcoin halving. Although scarcity can drive price increases, reduced mining activity can cause the price to flatten.

“However, the key point for investors to consider is not the specific dates of the halving events, but to focus on the growth of the network in general,” says Weisberger. “As long as the network continues to grow, the likelihood that Bitcoin will fulfill its potential as a global store of value increases.”

How to trade the bitcoin halving

Every time Bitcoin goes through a halving, the supply rate effectively halves as well. When demand levels for an asset remain constant but supply decreases, the asset tends to appreciate in value.

Traders can try to exploit this dynamic by investing in Bitcoin ahead of next April’s expected halving, hoping that it will increase the value of their holdings.

How has bitcoin halving affected BTC’s price in the past?

When the first halving happened in 2012, there was an insignificant effect on Bitcoin’s value, but this was in the early days of the cryptocurrency, before huge speculation began.

However, in the year before the second halving in 2016, Bitcoin went from around £170 to just over £500 (over 194%).

In the 12 months leading up to the May 2020 halving, Bitcoin rose from around £4,000 to around £8,000, marking a 100% increase in value.

We are now within four months of the next halving. In April 2023, Bitcoin was valued at around £23,000. Since then, BTC has risen to around £36,000.

While previous pre-halving periods have seen tremendous growth, early indications show that this one may be different. Regardless, past performance is no indicator of future results.

Bitcoin price

Cryptocurrency is unregulated in the UK. The UK regulator, the Financial Conduct Authority, has repeatedly warned investors that they risk losing all their money if they buy cryptocurrency, with no possibility of compensation.