The BTC price usually drops prior or soon after the halving event. The question is how long it would take for Bitcoin to bounce back.
Bitcoin mining is the process by which transactions are verified and added to the blockchain through computational work. Miners play a crucial role in maintaining the integrity, currency and immutability of the blockchain ledger. As a reward for their efforts, miners receive newly created Bitcoins.
Since Bitcoin’s inception, there have been four halving events, with the latest occurring April 19, 2024.
|
Date |
Price 1 month prior |
Price 1 month after |
|
Nov. 28, 2012 |
$10.26 |
$13.42 |
|
July 9, 2016 |
$583.11 |
$597.5 |
|
May 11, 2020 |
$6,909.95 |
$9,850 |
Around each event there was a minor drop in the BTC price. Reduced rewards pose financial challenges, especially for those heavily reliant on mining income.
The fixed supply of Bitcoin exacerbates this issue, potentially leading to bankruptcy if rewards decrease without corresponding increases in transaction fees or Bitcoin value.
2012 halving
In 2012, Bitcoin was still a new asset, relatively unknown to the general public. Priced at around $5-6 in the beginning of that year, BTC reached $10.
The first Bitcoin halving took place at block 210,000, which reduced the block reward from 50 BTC to 25 BTC. This event caused concern among crypto investors who feared it might discourage miners. Coincidentally, it occurred at a time when Bitcoin was gaining mainstream attention.
In the lead-up to the 2012 halving, Bitcoin’s price was around $10.26 with no significant price movements prior to the event. One month after the halving, the average price had increased to $13.42.
2016 halving
The second Bitcoin halving occurred July 9, 2016, reducing the block reward from 25 BTC to 12.5 BTC. This event coincided with increased media attention on Bitcoin and cryptocurrency, accompanied by the rise of altcoins and the ICO hype.
Leading up to the 2016 halving, the market had already priced in the event. Bitcoin reached $766 per unit on June 16 before declining by 13.83% to $660 on the halving date. It took approximately six months for the Bitcoin price to recover and reach previous highs.
However, it is fair to say that the drop in price was not only due to the halving event, hence the amount of time it took for Bitcoin to recover. Nonetheless, by Dec. 31, 2016, Bitcoin’s price had surged to $963 per unit, exceeding $1,000 by the end of the year.
2020 halving
The third Bitcoin halving occurred in May 2020, reducing block rewards from 12.5 BTC to 6.25 BTC, a level that remained until the fourth halving in April 2024. In the six months leading up to the 2020 halving, Bitcoin surged by 300% in price, following a trend similar to previous halving cycles.
However, just before the 2020 halving, Bitcoin experienced a major market crash on March 11, 2020. The price plummeted from $7,944.05 to $4,857.31, marking a significant 38.85% decline.
On May 10, Bitcoin was priced at $9,885. In less than two months, BTC exceeded this level and went on, reaching almost $30,000 by the end of that year.
Overall, Bitcoin experienced a significant rally in late 2020, soaring from roughly $11,000 in October 2020 to approximately $60,000 by March 2021. Bitcoin closed 2020 at $29,228 per coin, marking a remarkable 302% increase for the year.
What to expect after 2024 halving
In the three months leading up to the fourth halving in April 2024, the price of Bitcoin experienced one of its largest bull runs in history. During this period, Bitcoin surged by 180%, reaching an all-time high of $71,000, a remarkable milestone since the beginning of the year.
Samson Mow recently highlighted the importance of the approaching Bitcoin halving. Mow referred to it as “the spark of a massive supply shock.”
Crypto analyst Ali Martinez suggested in December that the forthcoming Bitcoin halving could fuel an extended period of bullish trends for the leading digital asset.
Anthony Pompliano highlighted that despite the recent significant crash, Bitcoin (BTC), the largest cryptocurrency by market capitalization, has appreciated eightfold since the previous halving event in 2020.
Changpeng Zhao recently referenced his tweet from October last year, where he mentioned adding a page on Bitcoin halving to Binance. He also shared his perspective on this event, noting that historically, about a year after a halving, Bitcoin’s price begins to surge to new highs. While the price does not double overnight, CZ highlighted that many people often start to question why this price increase occurs.
Investment banks, such as JP Morgan and Goldman Sachs, remain cautious. Goldman Sachs advised caution to clients about interpreting past Bitcoin halving cycles. They noted that while previous halvings often led to Bitcoin price increases, the timing to reach new all-time highs varied widely.
The bank’s Fixed Income, Currencies and Commodities (FICC) and Equities team emphasized the need to consider prevailing macroeconomic conditions when assessing the impact of halving events on Bitcoin prices. This advice was shared with clients on April 12 ahead of Bitcoin’s fourth halving in April 2024.
Legendary trader Peter Brandt expressed an optimistic view, prompting the “pump” cycle is still in action.
Conclusion
Historically, Bitcoin prices have surged following halving events. After the first halving in 2012, the price skyrocketed from $12 to $126 within six months. Similarly, following the second halving in 2016, Bitcoin’s price surged from $654 to $1,000 within seven months. In 2020, after the third halving, the price surged from $8,570 to $18,040 in the same time period.
However, price fluctuations are due to numerous factors even during the periods of halving. It is important to recognize that a surge in the Bitcoin price following a halving event is not guaranteed. The highly anticipated nature of these events implies that if a price increase were certain, rational investors would likely buy in advance, potentially driving up the price before the halving.
