Bitcoin Halving: Price Surge Expected

This weekend marks the scheduled bitcoin halving event, occurring approximately every four years. This phenomenon, which has previously taken place in 2012, 2016, and 2020, involves a 50% reduction in the daily supply of new bitcoins available to miners. With the upcoming halving, the number of new bitcoins available for mining each day will decrease from 900 to 450.

Currently, there are between 19 million and 20 million bitcoins in existence, with a total of 21 million tokens programmed to ever exist. The halving events are designed to keep the supply of bitcoin limited, thereby maintaining its status as a decentralized store of value.

Historically, the bitcoin price has experienced significant increases following previous halving events. After the 2012 halving, bitcoin rose by 8,069% in the following 12 months. Similarly, it increased by 284% after the 2016 halving and by 559% after the 2020 halving. Some analysts expect a similar trend to occur after the 2024 halving, citing the basic economic principle of reduced supply leading to increased demand and, consequently, higher prices.

However, not everyone is convinced that the halving will lead to a price surge. Critics argue that bitcoin’s value is already inflated, considering its limited utility. Despite this skepticism, bitcoin has seen remarkable returns in recent years, with its price reaching $61,000 per token last month, a significant increase from its price levels after previous halving events.

One reason for the recent dip in bitcoin prices is attributed to a 10% flash crash following a drone attack by Iran on Israel. Additionally, some analysts believe that the recent approval of spot bitcoin exchange-traded funds in January has already provided a new demand catalyst, contributing to the positive price action. As a result, some forecasts predict bitcoin reaching as high as $150,000 next year.

While halvings are generally seen as positive for bitcoin holders, they pose challenges for miners, as halving effectively halves their potential revenue. This pressure has led to underperformance by some publicly traded American bitcoin miners. However, analysts suggest that this pressure could lead to consolidation in the industry, ultimately benefiting investors.