Halving Bitcoin 2024, what is it? A complete guide

What is Bitcoin halving? A new "halving" is coming in 2024, expected on April 19, 2024, according to the most recent calculations.

Here’s everything you need to know, from the exact date to the forecast on the Bitcoin price. This is one of the most anticipated events of the year in the crypto landscape.

The Bitcoin halving is a crucial event for the cryptocurrency market that occurs approximately every four years.

During this “halving”, the rewards for miners are halved. This affects the supply of new Bitcoin and potentially increases the value of the cryptocurrency.

In the past, the Bitcoin halving has always generated a lot of enthusiasm in the crypto world, thanks to its ability to make BTC an anti-inflationary cryptocurrency, and for this reason, it is also typically a harbinger of a major price increase. Will this also be the case for the 2024 halving?

In this article, we’ll analyze what the Bitcoin halving is and how it works, the impact it has on the cryptocurrency market, and the predictions for the 2024 halving.

What is Bitcoin halving?

To better understand what the Bitcoin halving is and what changes after this operation (on the price front and in the entire market) we must necessarily take a step back and ask ourselves how Bitcoins are created.

As per protocol, the maximum number of BTC in circulation can never exceed 21 million. Once this threshold is reached - also known as the hard cap, established when Bitcoin was created to give the cryptocurrency its scarcity characteristic - production (mining) will stop. According to calculations, this will happen in 2140.

The extraction of the cryptocurrency takes place at the hands of the so-called miners who, for the work done, are rewarded through Bitcoin.

The work of miners is to validate transactions on the network, contributing to the creation of nodes and, ultimately, blocks of the blockchain. This happens by solving complex mathematical problems.

For each block created, the network gives the miner a certain amount of Bitcoin. Consequently, we can say that Bitcoins are created through the creation of blocks of the blockchain and that this creation is the result of transactions performed with the Bitcoin itself.

With the halving, miners’ reward is halved and consequently the number of new Bitcoins created drops. Their value, consequently and in theory, tends to increase.

In practice, to those who ask what the Bitcoin halving is, we could simply answer by defining it as a halving of the reward given to those who create Bitcoin and, consequently, of the number of new Bitcoins created for each block created on the Bitcoin blockchain.

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How does the Bitcoin halving work?

Thanks to the Bitcoin halving, the "production rates" are therefore slowed down, because fewer and fewer miners will be incentivized to work to create blocks on the Bitcoin blockchain, also considering the high costs necessary to carry out the complex calculations necessary.

The lower participation of miners in the Bitcoin creation process slows down the road toward reaching 21 million and makes the price less exposed to risks of depreciation.

A new block is created approximately every 10 minutes. For the first four years of their inception, the amount of new Bitcoins released after the creation of a single block was 50.

Every four years or so, that number has halved through the halving process. In 2012, the amount of new Bitcoins issued per block created dropped from 50 Bitcoins to 25. In 2016, it dropped further from 25 to 12.5. At the last halving, which took place on May 11, 2020, the reward dropped from 12.5 to 6.25 BTC per block. At the 2024 halving, the number will drop from 6.25 BTC to 3.125 BTC per block. From spring 2024, miners will therefore receive 3,125 Bitcoin for each block created.

Halving Bitcoin 2024: predictions

Bitcoin’s halving is timed by block height, not date.

The halving occurs every 210,000 blocks and the 2024 halving will occur when the 840,000th block is created. Based on the average creation time of each of the last 20,160 blocks (currently 9 minutes and 44 seconds), the 2024 Bitcoin halving will occur Friday, April 19, 2024.

The current reward for a block of Bitcoin is 6.25 Bitcoin. When block 840,000 is reached in April 2024, this will drop to 3,125 Bitcoin (BTC) per block.

“The common opinion of analysts sees that coinciding with the halving expected in 2024, we could see an increase in Bitcoin prices ”, explains Alessandro Frizzoni, one of the founders of the Cryptosmart exchange.

“This prediction”, explains the crypto expert, is “based on the fact that coinciding with previous halvings there was an increase in the price of Bitcoin, caused by a reduction in supply and constant demand”.

But things, according to Frizzoni’s point of view, are not exactly like that. “Up to now there have been three halvings (in 2012, 2016, and 2020, ed.), an extremely limited number to reach any conclusion”, continues the founder of Cryptosmart. “So the price increase could have been totally random.”

“In 2012, Bitcoin inflation was 12%, while following the last halving it dropped to 6%, a significant decrease. Over time, just as a result of the halvings, the inflation of this cryptocurrency is going towards zero. To date, Bitcoin inflation is 1.77%, and with the 2024 halving it will decrease by approximately 0.8%, a drop too limited to have an impact on Bitcoin prices",

Frizzoni underlines.

This time too the prediction could come true, but for another reason.

“We may have an increase in the price of Bitcoin around the halving not because of the halving itself but because of the approval of the Bitcoin ETF, which could arrive at the beginning of 2024 and which could generate a strong influx of purchasing capital into Bitcoin",

concludes the expert.

The Bitcoin halving can have direct implications on the price of the cryptocurrency. The reduction in the supply of Bitcoin can lead to an increase in its value as it becomes scarcer on the market. This can be attributed to the classic law of supply and demand, where a decrease in supply for the same demand can lead to an increase in price.

A clear example of this dynamic occurred in 2017, after the 2016 halving. During that year, the price of Bitcoin reached its (then) all-time high, exceeding $20,000. Many experts attribute this price increase to the effect of the halving and the resulting decrease in the supply of Bitcoin on the market.

However, it is important to note that the halving is not the only factor affecting the price of Bitcoin. Many other variables can influence the market, such as demand, technological developments, and global economic conditions. Therefore, it is crucial to consider the halving as one factor among many that can influence the price of Bitcoin.

In addition to the price impact, the Bitcoin halving can also influence market sentiment. Investors and market participants often react to halving events differently, based on their expectations and investment strategies.

Some traders may see the halving as a positive sign and an opportunity to invest in Bitcoin. The reduction in supply could be interpreted as a factor that could lead to an increase in price in the long run. As a result, they may increase Bitcoin purchases ahead of the halving, pushing the price higher.

On the other hand, others interpret the halving as a factor that could lead to a decrease in price, amid fears that a reduction in supply is not enough to compensate for the decrease in demand or that the halving has already been priced in the current price of Bitcoin. Therefore, some market participants may decide to sell Bitcoin ahead of the halving, causing downward pressure on the price.

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Why does the price of Bitcoin rise with the halving?

Through the halving mechanism, the supply of Bitcoin undergoes a strong reduction, directly impacting the dynamics inherent to the establishment of the price. This is because theoretically there should be less push from the supply side, thus stimulating the price rise more.

However, a clarification must be made: the value of Bitcoin is not mathematically set for perennial and unconditional growth as many think. This is because, for the price to continue to rise, the demand for Bitcoin must remain at least constant.

If this last ingredient is not present, the conclusion of the halving process will not be sufficient to increase the price of BTC. Otherwise, it would be like saying that any PoW (Proof-of-Work) coin will necessarily have to acquire value while history lists a long series of cryptocurrencies with this consensus mechanism that have ended up forgotten.

What in the past pushed the price upwards, causing Bitcoin to record returns, was therefore not exclusively the process linked to the halving, but the strong push on the demand side resulting precisely from the incentive deriving from the fact that production had been halved.

Bitcoin halving history: 2012, 2016, 2020

To get an idea of the possible implications of Bitcoin halving in 2024, let’s analyze the historical performance of Bitcoin after the halvings already implemented.

The first halving occurred in November 2012, followed by halvings in July 2016 and May 2020. Each of these events was accompanied by distinct price movements that offer important lessons for anticipating the future of Bitcoin.

2012
In the period leading up to the first halving, the price of Bitcoin experienced a slow increase, followed by a significant increase in the following months.

2016
Similarly, the 2016 halving was preceded by a period of price consolidation, leading to a major bull run that pushed the price of Bitcoin to new all-time highs.

2020
The most recent halving, that of 2020, followed a similar pattern, with the price of Bitcoin rising to unprecedented levels in the following months.

How to prepare for Bitcoin halving 2024?

Once you understand what halving is, how it works, and why it can have a bullish impact on the price of Bitcoin, how can you best prepare for the event expected in April 2024?

1) Study historical data
Study the price patterns and market behavior of Bitcoin before and after the already implemented halvings. While historical data cannot predict the future, it provides valuable information about potential trends and market sentiment. Look for patterns, correlations, and any relevant indicators that can help make informed predictions.

2) Keep an eye on the market
The cryptocurrency market is still very volatile and susceptible to changes. It is important to stay updated on the latest cryptocurrency news. Being well-informed about any updates or changes leading up to the event helps you make informed decisions.

3) Diversify your portfolio
Consider diversifying your cryptocurrency portfolio to reduce risk. While the Bitcoin halving may create price volatility, other cryptocurrencies may behave differently during the same period. Allocating a portion of your investment to other cryptocurrencies or assets can help mitigate potential losses or take advantage of alternative investment opportunities.

4) Monitor market sentiment
The market is influenced by how people react to certain news. Analyze social media conversations and look for market indicators to gauge overall sentiment. This information can help you better understand market expectations towards the 2024 Bitcoin halving and make informed decisions.

Original article published on Money.it Italy 2024-01-02 12:17:44. Original title: Halving Bitcoin 2024, cos’è? Previsioni, guida completa