A significant technological event for bitcoin is one year away. History indicates the beginning of a new bull run
Vital point: At the beginning of the year, Bitcoin has increased by 80%. History demonstrates that the Bitcoin typically performs well before its alleged “halving.“
The incentives for successfully mining new bitcoin are cut in half every four years due to the bitcoin halving. The goal is to gradually decrease the supply of bitcoin.
The price of bitcoin rose by 19% from the same day a year prior on May 11, 2020, before the last halving.
Although there are other factors that affect price, the halving is a significant event for investors and essential to the case for bitcoin as a store of value due to its restricted quantity.
A significant technical development for Bitcoin is still over a year away, and it might serve as the impetus for a sustained increase in the value of the cryptocurrency.
The next so-called “halving” of bitcoin is anticipated to occur in April or May 2024, however the precise date is not yet known.
Although a likely U.S. Federal Reserve interest rate cut competes with the risk of slow growth and tightened credit conditions brought on by problems in the banking sector, bitcoin has been gaining in recent weeks in anticipation of the halving.
Data from CoinGecko shows that as of Wednesday morning, one bitcoin was worth almost $30,000. From the beginning of the year, the largest cryptocurrency in the world has increased by more than 80%.
The rise in the price of bitcoin above $30,000 at a period of bank failures and economic unpredictability, according to Vijay Ayyar, vice president of corporate development and international at cryptocurrency exchange Luno, indicates that the cyclical “bottom” for bitcoin is emerging.
Ayyar told CNBC via email that “this tends to happen a year or so prior to the Bitcoin halving event, which is scheduled for approximately April 2024.”
What does halving bitcoin mean?
A Bitcoin halving occurs every 210,000 new “blocks” that are added to the blockchain, or roughly every four years. The occasion reduces by 50% the rewards given to bitcoin miners, who work voluntarily to validate network transactions and create new currencies using specialised equipment. The goal is to limit the quantity of brand-new bitcoin units that are placed onto the market.
For every successfully mined block, bitcoin miners currently receive 6.25 bitcoin. This indicates that their machine had sufficient processing capacity to solve the cryptographic conundrums that guard the bitcoin network and keep it safe from hostile actors.
This prize will be cut in half at the subsequent bitcoin halving, reaching 3.125 bitcoin.
Supporters of the cryptocurrency claim that by increasing the scarcity of bitcoin, this will help drive up the price.
21 million bitcoins are the absolute most that will ever be in circulation. This is ensured by the halving mechanism, which reduces mining rewards for bitcoin to zero ultimately.
According to data from CCData, the price of bitcoin climbed by 19% in the previous 12 months, from $7,191.36 to $8,568.88, before the most recent halving, which happened on May 11, 2020.
The halving before that, which took place on July 9, 2016, saw a rise in bitcoin of 142% over the previous year, from $269.14 to $651.83.
Bitcoin halving occasions and record highs
According to CCData’s statistics, the price of bitcoin increased by 384% to $12.35 from $2.55 after the first-ever halving on November 28, 2012.
Although the precise timing and magnitude of returns after halving can vary, it appears that investors frequently accumulate Bitcoin in the lead-up to the event, according to Jamie Sly, analyst at CryptoCompare, who spoke to CNBC.
“The accumulating period has typically lasted at least 500 days from the market bottom following the breakout to the halve date.”
Sly continued, “This would suggest that we are only 142 days into the current cycle if we were to assume that the market bottom for this cycle was in November of last year (when Bitcoin hit a yearly low of $15,760). This would be in line with the following anticipated Bitcoin halving date, which is 378 days away.
Gains since the halving of Bitcoin
In the months that follow the price halving, bitcoin often experiences an even greater increase.
Since its inception, Bitcoin has climbed to record highs.
According to CCData, the cryptocurrency rose 688.31% in the 546 days that followed the May 11, 2020, halving, to hit a then-record high of $67,549.14 on November 8, 2021.
Before to it, on July 9, 2016, there was a halving that caused bitcoin to soar 2,824% to an all-time high of $19,065.71 by mid-December 2017.
A turbulent 2022 for bitcoin was marked by the demise of important businesses and initiatives, including the stablecoin terraUSD and the cryptocurrency exchange FTX.
Higher interest rates in the US and other major nations as a result of rising inflation drove investors away from bitcoin and other risky assets.
As a result, the prices of numerous popular digital currencies have fallen precipitously from their record highs.
Bitcoin is still down more than 50% from its highs in November 2021, despite its latest rise near $30,000.
