Impact of Bitcoin Halving on Bitcoin’s Prices

A Bitcoin halving event takes place when the reward for Bitcoin mining transactions is cut in half. The Bitcoin network mines 210,000 blocks approximately every four years. Therefore, the block reward given to Bitcoin is reduced in half. Since October 2023, the Bitcoin halves have taken place thrice. In November 2012, halving occurred to 25 bitcoins. In July 2016, halving occurred to 12.5 bitcoins and on May 11, 2020, halving occurred to 6.25 bitcoins. Let us delve deeper into the impact of this phenomenon on Bitcoin’s prices.

First Bitcoin Halving and Its Impact on Bitcoin’s Price

The first halving took place on 28th November 2012. The price of Bitcoin at the time of halving was around $13. After halving, the peak price of Bitcoin then went up to $1152. In 2012, Bitcoin was relatively less popular. However, after halving its popularity increased considerably. This was because Bitcoin’s price in American dollars spiked and crossed double digits. In those times, suddenly having a price of over $1000 was startling and it made headlines. 

There were several other reasons why Bitcoin’s credibility improved after the first halving. The reasons were a combination of factors such as perception of scarcity, and growing demand from investors. Halving reduced block rewards and this is the reason there were fewer instances of Bitcoin’s creation. In those times, 10.5 million Bitcoins were released, and 210,000 blocks were mined by this point.

Second Bitcoin Halving and Its Impact on Bitcoin’s Price

The second halving took place on 16th July 2016. The price of Bitcoin at the time of halving was around $664. After halving, the peak price of Bitcoin then went up to $17760. In 2016, Bitcoin had already gained substantial popularity and acceptance among investors. Consequently, the halving led to a short-term price increase. 

The earlier factors had a similar impact on Bitcoin’s price. For instance, when the 420,000th block was mined, the block reward was cut in half to only 12.5 Bitcoin’s trading value dropped to around $651 and it experienced a rapid decrease in prices within a few weeks. But the decline was temporary, as Bitcoin rebounded and the price levels reached record margins of $20000. Hence, even in 2016, Bitcoin’s halving led to a price rise and the impact was largely positive.

Third Bitcoin Halving and Its Impact on Bitcoin’s Price

The third halving took place on 11th May 2020. The price of Bitcoin at the time of halving was around $9734. After halving, the peak price of Bitcoin then went up to $67549. Therefore, it is an undeniable fact that the third event had a positive impact on Bitcoin. In 2020, the Covid-19 crisis caused the Bitcoin price to crash in March. It soon recovered remarkably and experienced an upward surge. For instance, after halving, Bitcoin was trading around $8787. However, after 18 months, the price crossed above $66000. 

Apart from the COVID-19 Pandemic, another notable event took place that influenced the prices of Bitcoin back then in 2016. Billionaires Micheal Saylor and Tudor Jones announced that they will make allocations to Bitcoin. This too had a positive impact on the prices. 

Overall Assessment 

Bitcoin’s halving in 2012, 2016, and 2020 did lead to its increase in prices. Hence, it will not be an exaggeration to suggest that the impact was positive. Bitcoin halving is a good sign as it creates disinflationary pressure on the currency. Consequently, it leads to an increase in value over time. This was true despite the fact that the three situations in those years were quite different. However, it is also true that market dynamics have the upper hand in determining the prices of cryptocurrencies including Bitcoin. Therefore, there is a high possibility that prices will again rise when the fourth event will take place in 2024. 

Also Read- Purposes of Digital Asset Custody in Financial Freedom

Conclusion

2023 has been a good year for Bitcoin because its prices were substantially higher. The notable positive impact on Bitcoin is that in 2024, spot Bitcoin ETF was approved in the United States. Price halving historically in 3 separate instances did have a positive impact and Bitcoin tends to perform better in a lower-rate environment. Thus, it can be said that Bitcoin halving in 2024 will also have a positive impact on the crypto’s value and its investors.