Bitcoin Halving 2024: What You Need to Know

The next Bitcoin halving in 2024 will make Bitcoin scarcer, once again shake up the mining world and make BTC a mainstay in headlines. Even though there is nearly a year to it, as it's scheduled for April 2024, it's already the most talked-about thing in crypto besides regulation.

But whereas crypto regulation is only relevant to a point, as the market is meant to be unregulated to begin with, Bitcoin halving is not. It's something that, by its very nature, has to cause a massive upheaval in the market.

There is a lot to unpack when it comes to why this halving will be important, how it will impact the market and what we can expect in terms of Bitcoin price movements. But first, what's a halving anyways?

What is Bitcoin halving?

As you probably already know, Bitcoin is "mined" by computers solving complex equations and being rewarded increments of the token for it. It used to be as simple as that: if we're going back to 2010-2012, you might have hoped for a decent block reward by just using a good computer for this.

As for how does Bitcoin halving work, the clue is in the name: every four years, miners' rewards are slashed in half.

The more prices increased, the more Bitcoin mining from your own PC became akin to prospecting gold. Miners became large businesses with massive warehouses full of the highest-end equipment available, and oftentimes very specific about their location too to manage energy costs.

This made Bitcoin more valuable on its own. It's not just scarcity, but access: you weren't getting BTC tokens by powering up your PC any longer. With the 2024 halving, though, we're approaching another shift in this system that has to impact price, if on nothing else than supply and demand.

How is Bitcoin halving 2024 different from previous ones?

Well, we can put it in some brief terms. In 2016, or even 2020, if you wanted to become a Bitcoin miner, you had a few things to worry about. It was mostly capital and location. And if you had both covered, there was probably no reason not to give it a try.

Now though, we're starting to see a question emerge: is it going to be worth it? CoinDesk recently ran a piece titled: "Bitcoin Halving Is Coming and Only the Most Efficient Miners Will Survive." The whole thing has a survival-of-the-fittest element to it. It was always there, but now it's being upped to unseen levels.

You might think that it's because of just how little reward there is in literal sense. After all, omitting the first Bitcoin halving:

·        In 2012, one block gave you 50 BTC

·        By 2016, you went from receiving 25 BTC to 12.5 BTC for the same thing you were doing previously

·        And in 2020, your block rewards were slashed to the current reward of 6.25 BTC per block

The 2024 halving is going to make the same reward 3.125 Bitcoins. Notice, we aren't even talking about Bitcoin's price movements yet, instead focusing more on the industrial side of things. Prices are equally important, but there are other considerations to make before getting there.

From 2024 and onwards, miners will objectively get a meager amount of assets for their return. Bitcoin mining is said to be three to four times as expensive as gold mining from an operational standpoint. And don't we all remember what happened when gold prices fell after 2011? Miners went ahead and shut down their mines as a result, which is a far more laborious decision than one to shut down a Bitcoin mining warehouse.

It also can't be overstated that less miners means higher Bitcoin network transaction fees, which becomes a bigger issue the larger the market gets. So, if the number of miners goes down, it will be more difficult to trade Bitcoin address-to-address.

Related: Gold vs Bitcoin - Which is a Better Investment?

How will economic conditions impact Bitcoin mining after the halving?

If you've paid any attention to the stock market, you know that it's almost entirely in the red this year except for a select few sectors. And those are experimental ones. Recession has become a buzzword, and though there has been no official confirmation yet, everyone can feel it.

The global economy is in dire straits, especially when we understand how dependent it is on quantitative easing to persist. But it gets worse: while we've seen inflation across the board, one of the most worrisome has been that of energy prices.

The Russia-Ukraine war over the past year has shot up energy prices massively due to Russia's supply of oil and gas being cut off from the West. And, as you might imagine, energy prices are one of the main factors when deciding when, where and how to start a mining operation. Mongolia wasn't a top Bitcoin mining location for its relaxing tall grass.

So Bitcoin miners have a lot more to contend with than just the meager rewards in terms of asset amount. The very thing that powers the mining has gotten pricier, and more of that is likely to come. Of course, there are many other costs associated with Bitcoin mining even after the initial operation is set and running. And all of this is now becoming pricier.

Existing miners will continuously be re-evaluating whether their endeavor is worth it. Between prices and competition, new miners will face themselves with some serious considerations.

What is the great equalizer of sorts in all this talk, one that will make or break mining operations? Token prices. And it's time we get into them.

Related: Recession vs Depression - What's the Difference?

How will the 2024 Bitcoin halving impact token prices: An introduction

Before we get into projections and technical analysis, let's outline a few key points around Bitcoin halving dates:

·       In 2012, Bitcoin went for around $10 a piece, so you had to have had a strong conviction in the market to get the kinds of rewards miners are getting now. In other words, you had to have been a HODLer.

·        In 2016, Bitcoin was already hovering around $500 a piece. So would you rather get 50 tokens worth $10 or 25 tokens worth $500? An easy answer for an increasing number of miners.

·        In 2020, we can say one Bitcoin was around $8,000. The same math applies.

·        And in 2024, we can for now assume that prices of a token will be a minimum of $30,000.

There's plenty to say about how sentiment boosts prices and the other way around, and we'll try to say it all. The bottom line here is that, even with a block reward of 3.125, Bitcoin might turn out to be immensely profitable to mine if it shoots up in price.

What if it goes to $100,000 before 2024 or, say, in 2025? What about $200,000 or more? Assuming that doesn't happen due to U.S. dollar hyperinflation, miners will scramble to get even the comparatively meager 3.125 tokens a block.

Now, it's finally time to try and figure out how the halving itself might impact the market.

Bitcoin prices throughout history before and after the halving 

How much and whether to begin with 'does Bitcoin halving impact prices?' is a subject of more debate than you might think. There are actually plenty of detractors from the idea, who go on and say that the halving is already "baked into" Bitcoin's price.

This is a very misguided way of viewing things, and the "baking in" term is most likely pulled straight from the gold market. When the Federal Reserve hikes rates, it's viewed as negative for gold.

And it's often rightly pointed out that the markets price in the hikes months in advance and oftentimes excessively. So when the hike does happen, gold barely sustains any losses: they've already happened due to this pricing in.

But we can't really try and apply this logic to Bitcoin halvings. A Bitcoin halving event directly impacts the amount of newly-created Bitcoin that goes into the market: it upsets supply and demand dynamics, one of the cornerstones of any market. In the case of gold, central bank rate hikes don't actually change supply, making this argument mostly irrelevant.

Here's a general Bitcoin halving chart outlining how the token has historically moved before and after:

·        2012 halving on November 2012: Bitcoin goes from $12 to $964 in 1 year

·        2016 halving on July 6: Bitcoin goes from $663 to $2,550 in 1 year

·        2020 halving on May 11: Bitcoin goes from $8,740 to $56,669 in 1 year

There is an interesting price dynamic between 2012 and 2016, as you'll notice Bitcoin actually fell from the 1-year gain price target by the time of the second halving. But the fall was actually meager considering what the halving appears to have done for Bitcoin's price: it had multiplied it by over 50x.

The subsequent halvings were less impactful from that standpoint because the multiplication of the price was lesser. But even with a 10x multiplication in the years after 2016, prices were going crazy.

We don't really have enough of a timeline to know how big the next multiplication or bottom will be after the 2024 halving. Will it be 10x again?

Will it be 3x, setting very strong support around $100,000? Or will it return to earlier multiplication figures? These are exciting speculations, which is one of the reasons we like the crypto market.

Understanding Bitcoin as a scarcity-oriented token

Bitcoin has many intended uses and purposes, but one of the primary ones has always been that of a scarce and finite resource. Read: the exact opposite of fiat currencies.

It was even meant to upend gold in that regard, which had up to that point been viewed as the... well, gold standard of scarcity. But how scarce is it? What are the exact figures? We know it's hard to get, but the rest is muddy.

Not the case with Bitcoin. Its fixed supply of 21 million made it known exactly how scarce it was going to be from the get go: very scarce. Compared to gold, there's no way to boost supply: greater demand can only be remedied with greater prices. And this is why BTC has the acclaim that it has.

Right now, there's a little over $19 million of Bitcoin in circulation. Those who believe that the supply cap can be reached almost unanimously agree it will take over a century to reach it. There are many who believe that the supply won't be reached because halvings and other events pertaining to the Bitcoin blockchain will simply render mining unfeasible.

Let us also give a brief overview of how many new Bitcoins have been created daily before and after the halving:

·        2012: 3,600 new Bitcoins a day

·        2016: 1,800 new Bitcoins a day

·        2020: 900 new Bitcoins a day

·        2024: 450 new Bitcoins a day

A massive supply squeeze in a little over a decade. 450 is still not insignificant and far from getting miners to reconsider what they're doing as a whole. But as we get to two digits, the question of "Why bother?" will become increasingly prominent among miners in general.

Perhaps the only reason Bitcoin isn't viewed as the go-to store of value right now is its volatility. The massive price targets are to blame: between 2012 to 2016, it was amusingly a much better store of value. You'd generally only risk "losing" around $200, which is comparable to what gold investors face.

These days, though? You buy Bitcoin to store $40,000 and a year later you've "lost" $20,000. Sure, the prices are regained eventually, but the psychological effect remains too much for many.

How will the 2024 Bitcoin halving impact the crypto market as a whole?

Bitcoin purists love this facet of the crypto market, while everyone else probably hates it: where BTC goes, other tokens follow. The process of attempting to decouple tokens from Bitcoin has been slow and dubiously successful so far. Over a decade into the market, no token can ignore Bitcoin's gains or losses.

Just the track record of this tells us it's unlikely to change quickly and that the process will continue to be a slow one, if there is a change to begin with. You'd be hard-pressed to find someone who expects Bitcoin to lose in value after the 2024 halving: considerable gains are expected instead.

And, as it does, practically every other crypto will, just as they have in the past. It's also well-known that altcoins can gain much more than Bitcoin during bouts of price appreciation. So whatever token you have, if you're a HODLer, you're entirely within reason to be excited about the halving and the impact it will have on token valuations.