Well, some would say the Bitcoin (BTC) halving events had a more dramatic effect than the most recent one. Typically, the BTC to USD value jumps, as can be seen on platforms such as Binance, Forbes and Bloomberg et al, but not always immediately.
The most recent halving happened on April 19th, 2024. All the reports state there were, and still are, mixed sentiments among investors about the event. There weren’t fireworks and people running around like bulls on a bullish run.
Still, if we’re talking about supply and demand, Bitcoin halving events always have an impact. Read on to find out more.
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What’s a Bitcoin Halving Event?
Some people might read ‘Bitcoin halving event’ and think that it’s a halving in the number of Bitcoins circulating or something related to the value. It’s not.
A BTC halving event relates to the miners, although it does have a direct effect (most of the time) on the value of Bitcoin. During the event, the reward miners get for adding transactions to the BTC blockchain halves. Miners, if you didn’t know, are the ones authorizing and processing any transactions involving Bitcoin and its blockchain network and ensuring it’s secure. Every time they authorize a transaction and add it to the blockchain, they receive a new Bitcoin.
When Bitcoin launched in 2009, miners would receive 50 BTC per block they added to the blockchain. How nice that would be, and how rich those people must have become if they held. Since 2009, there have been four halving events. The first reduced the reward from 50 BTC to 25, the next from 25 to 12.5, and so on. The most recent one, last April, reduced the miners’ reward to 3.125 BTC per block.
There’s a lot more to how mining works; it’s not as simple as authorizing a transaction and adding it to the network. It’s a rat race of supercomputers and puzzles, but we won’t get into that in this article.
How Do Halving Events Affect Bitcoin’s Supply?
The halving events were all part of the original master plan from the presumed anonymous Satoshi Nakamoto, a pseudonymous person or persons. Yes, the halving events relate directly to miners, but there’s more to it than that. The system works by adding more bitcoins into circulation every time a new block is added to the blockchain. So, in 2009, for every one Bitcoin block added to the blockchain, 50 new ones were created and rewarded to the miners. They were then ‘in circulation.’
Now, the bitcoins going into circulation each time a BTC is added to the blockchain are dramatically less as we reach the inevitable 21 million supply cap. Statistics show we’re at about 93% of the total Bitcoin supply.
So, essentially, with every Bitcoin halving, an event that happens roughly every 4 years, we’re edging closer to the total supply of Bitcoins, which should, in theory, increase the value exponentially as new Bitcoins become extinct and people pay extortionate amounts to get their hands on one.
How Do Halving Events Affect Bitcoin’s Demand?
Well, for the reason we just mentioned. Bitcoin will, one day, become an asset that only some people have. Yes, there will be 21 million of them circulating, but there will never be more than that. The scarcity is what drives demand.
It’s the same with other assets; the rarer it is, the more valuable it is. And while you can argue that an asset of 21 million Bitcoins isn’t rare, it very much will be when you can’t get your hands on one without paying $$$$. Currently, the value of Bitcoin is $104,032.22. You can imagine how much it will increase when everyone wants something that not everyone can have.
That demand always seems to have a positive effect on the coin’s value. Here’s a look at the previous halvings:
- First Halving: Value increased from $10.26 one month before to $1,003.38 one year after.
- Second Halving: Value increased from $583.11 one month before to $2,608.10 one year after.
- Third Halving: Value increased from $6,909.95 one month before to $55,847.24 one year after.
Now, you can’t blame all of these price increases solely on the halving events. There were so many macroeconomic and Bitcoin network developments in between that had a massive impact. Almost too many to say that any spike in value was directly related to the halving events, especially when you’re looking at figures from one year later.
When is The Next Bitcoin Halving?
The next Bitcoin halving event is scheduled for 2028, sticking to the trend of happening every four years. The events follow their own schedule of a number of blocks being minted, and the 2028 halving event will mean 850,000 blocks have been mined.
Despite the scarcity feeling more real, we’re actually so far away from reaching the total supply of Bitcoin because of this halving event pattern. The fewer bitcoins being added into circulation as a mining reward, the longer it takes to reach the total circulating limit. The numbers show the final halving event will happen in 2140 when all 21 million bitcoins will have been minted. Bear in mind, we’re only reaching 850,000 at the 2028 halving event.
Are Bitcoin halving events as dramatic as people say? No. Maybe as we reach closer to the total circulating cap, they will be. But for now, macroeconomics has more of an effect on the total value.
