After a 2023 spend recovered from a dismal bear market the year before, cryptocurrency is back in bull territory. There is no better evidence of that than bitcoin’s recent performance.
The most popular cryptocurrency broke its all-time high in March, rising to $73,750. Better yet, analysts believe growth will continue this year, thanks to the upcoming halving date.
Bitcoin prices have quadrupled since January 2023, with much of the recent gains attributed to hype surrounding two long-awaited events in 2024. The first of these, the approval of 11 spot bitcoin ETFs by the US Securities and Exchange Commission, took place in January and resulted in billions of dollars in inflows. Just a month after this news was announced, bitcoin passed $50,000, a value not seen by the asset since 2021. Now prices have hit a new all-time high and are hovering around $70,000.
The next event, slated for mid-April, will slow the production of new bitcoin, which could seemingly push the asset’s price even higher. Here’s what crypto investors need to know about the upcoming bitcoin halving.
What is bitcoin halving?
Bitcoin halving is an event that has occurred roughly every four years since the cryptocurrency’s inception in 2009. Halving dates won’t directly affect bitcoin holders, but they involve behind-the-scenes actions that can be a good harbinger of the asset’s future value.
In a nutshell, halving has to do with bitcoin mining – the process by which transactions are verified on the blockchain and new bitcoins are put into circulation. Miners are computers that create bitcoin, which happens by solving complex mathematical equations. Anyone, from a hobbyist miner using their home computer to giant corporations with sheds full of mining rigs, can use their computing power to create bitcoin. When one of these computers solves a problem, the network rewards the miner with the newly minted bitcoin, thereby growing the total number of coins in circulation.
However, there is a limited number of bitcoins that can be mined – 21 million to be exact. With 19.6 million currently in circulation, only 1.4 million remain to be mined. When a halving event occurs, the bitcoin protocol cuts in half the number of coins awarded to successful miners. Since 2020, miners have received 6.25 bitcoin for solving a problem. When the next halving happens, miners will only receive 3,125.
The result is that the computing power required to create new bitcoin doubles after each halving. In theory, the sharp drop in production will cause the asset’s value to appreciate, given that demand for the asset remains constant or grows.
When is the next bitcoin halving?
One unique feature of bitcoin halving is that although it happens roughly every four years, there is no set date for when the next halving will come. Rather, it happens after 210,000 blocks on the bitcoin blockchain are filled with data. Although it takes about four years to complete this much mining, the specific day it will occur cannot be accurately predicted until the event is fairly close to the event. That said, experts estimate that the next halving will happen on or around April 19, just weeks from now.
These halving events will continue approximately every four years until the 21 million bitcoins that make up the total supply have been mined. It is estimated that it will take until the year 2140 for this to happen.
Is now a good time to buy bitcoin?
With the bitcoin halving approaching, is now the time to invest in bitcoin? Previous cases set a precedent for price increases; in the months following each of the three previous halvings, the asset appreciated significantly. The last halving, which took place in May 2020, saw the cryptocurrency add $2,000 to its value in the next three months. However, the reasons why bitcoin prices rise or fall are complicated and don’t always make sense; throughout that year the coin soared from around $7,194 to $32,810 on little news.
Experts are largely bullish on the year ahead for cryptocurrency, and the context of bitcoin spot ETFs and the halving helps explain why. Martin Leinweber, digital asset product strategist at MarketVector Indexes, tells Money that demand for bitcoin products is extremely high.
“Investors previously said that they achieved $5–$10 billion USD [in net inflows to bitcoin ETFs] in the first three months would be an unprecedented success,” he says, adding that many institutions have seen inflows exceed these forecasts. Now BlackRock alone holds nearly $17 billion in assets under management.
Leinweber uses this point to illustrate that the demand for bitcoin already greatly exceeds the available supply.
“A wider range of investors are devoting a portion of their assets to bitcoin,” he says. “Major portfolio managers are now incorporating this new asset class into their allocations.”
With that already happening, a 50% slowdown in the production of new bitcoin after the halving will only fuel demand further. There are clear expectations for price increases around the halving, but investors should not expect a guaranteed moonshot.
“Buying before the halving carries volatility risks,” says Dan Weiskopf, co-portfolio manager of ETF company Amplify’s Transformational Data Sharing ETF. Weiskopf says that the momentum already generated by the recent bitcoin ETF approvals will likely keep prices up ahead of the halving, but he reminds investors to be patient and expect volatility. “[Do] don’t expect every day to be a straight line, 3%-5% rise,” he says.
More from Money:
Why Some Crypto Experts Predict Bitcoin Will Rise To All-Highs In 2024
10 Best Crypto Wallets of February 2024
Bitcoin Spot ETF Approval Could Get ‘Millions More Investors’ Into Crypto
Disclaimer for Uncirculars, with a Touch of Personality:
While we love diving into the exciting world of crypto here at Uncirculars, remember that this post, and all our content, is purely for your information and exploration. Think of it as your crypto compass, pointing you in the right direction to do your own research and make informed decisions.
No legal, tax, investment, or financial advice should be inferred from these pixels. We’re not fortune tellers or stockbrokers, just passionate crypto enthusiasts sharing our knowledge.
And just like that rollercoaster ride in your favorite DeFi protocol, past performance isn’t a guarantee of future thrills. The value of crypto assets can be as unpredictable as a moon landing, so buckle up and do your due diligence before taking the plunge.
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