Anyone keeping an eye on the cryptocurrency market will know that something big is about to happen. Specifically, Bitcoin is gearing up for its next Bitcoin halving event. This is something experts predict could set off a cryptocurrency rally - and will forever change the supply of Bitcoin.
The Bitcoin halving, or more accurately the “Bitcoin block reward halving” cuts the mining reward for miners in half. As anyone familiar with Bitcoin and the blockchain will know, cryptocurrencies differ from fiat currencies. Particularly, there is no central authority that can “print” more Bitcoin.
Instead, miners “unlock” new Bitcoin through mining them, or by producing new blocks. There is a total Bitcoin supply of 21,000,000, which miners continually unlock. At the time of writing, a bit more than 18,360,000 Bitcoin are currently in circulation. However, Bitcoin halving events continually reduce the Bitcoin mining reward.
As such, it will take roughly until the year 2140 until the remaining Bitcoin block rewards reach 0. The current block reward is 12.5 coins (Bitcoin) per block. Moreover, the reward began at 50 coins per block.
The first Bitcoin halving in 2012 saw this reward fall to 25 coins, effectively “halving” the block reward. Additionally, the last Bitcoin halving, back in 2016, cut this reward in half as well - to the current reward of 12.5 coins.
This is why observers are looking to see what the 2020 Bitcoin halving will do to the price of Bitcoin. It will effectively reduce the reward to 6.25 coins per block. Furthermore, this is in line with the premise that the supply of Bitcoin will grow scarcer over time. Bitcoin is, therefore, oftentimes known as a “deflationary currency”.
The previous chart presents an intuitive overview of the supply of Bitcoin. The red line shows Bitcoin’s inflation rate - or, more accurately, deflation rate - and the blue line the total supply. The sharp reductions in the inflation rate are Bitcoin halving events.
Moreover, it shows that the next roughly four years following the Bitcoin 2020 halving are the last with significant rewards. After the 840,000 block threshold, mining rewards will plummet to 3.125, and then eventually sink to 1.5625 Bitcoin per block.
As such, the current mining reward of 12.5 Bitcoin per block will appear just as massive as the 50 Bitcoin reward before the first Bitcoin halving currently seems. Additionally, it also shows that there are relatively few Bitcoin left to mine following this halving.
The upcoming 2020 Bitcoin halving will likely take place on May 12th 2020, according to the current block mining trend. Although it could sound odd that nobody knows the exact date and time for the Bitcoin halving, this is deliberate.
Specifically, a Bitcoin halving takes place after 210,000 blocks have been mined. This takes place roughly every fourth year. Nevertheless, the pace with which miners mine new Bitcoin continues to fluctuate. At this time, the ETA of the reward halving event is May 12th 2020 at 03:30 UTC.
However, the Bitcoin halving time will probably shift somewhat - but will likely happen sometime during May 12th 2020. There has previously been two previous mining halving events, meaning that the 2020 Bitcoin halving will mean 630,000 blocks have been mined.
At the time of writing, over 629,000 blocks are already mined, meaning there is less than 1,000 blocks left to mine until the Bitcoin reward halving on May 12th. However, this will not be the end of the Bitcoin halving cycle. Instead, Bitcoin will continue to cut its rewards in half until all 21 million Bitcoin are in circulation.
The exact time for Bitcoin’s 2020 halving is currently around 03:30 UTC on May 12th. The Bitcoin halving time will shift somewhat since the actual mining speed deviates somewhat from estimates. Nevertheless, the Bitcoin halving time will occur once the block height reaches 630,000 blocks.
Following the Bitcoin halving time, the block mining reward will effectively be cut in half. This means that the daily amount of Bitcoin that miners mine will drop. Currently, miners mine roughly 1800 Bitcoin per day - and this will drop to just 900 Bitcoin per day after May 12th.
This means that the production of Bitcoin will slow significantly after the Bitcoin halving time. Moreover, this is not just some temporary effect - the halving will irrevocably lower the continuous production of new Bitcoin.
Perhaps just as importantly, the Bitcoin halving events also mean that crypto-inflation is kept in check. Put simply, the event means that mining Bitcoin becomes more time and consequently resource intensive.
As fewer Bitcoins make it into circulation each day, week and year, Bitcoin’s inflation is automatically kept low. This also increases the chance of appreciating assets, just like lowering any type of inflation. Specifically, reducing the available demand while maintaining supply drives higher demand and consequently leads to higher prices.
The first-ever Bitcoin halving event took place on November 29th 2012. Although eight years have since passed, the mechanics of this halving were more or less identical to the 2020 halving.
The only major difference was that the Bitcoin block height was 210,000 at the time of the 2012 halving (it will be 630,000 this time) and that the reward fell from 50 coins per block to 25.
Image Source: Bloomberg
As the Bitcoin halving events occur every 210,000 blocks, it is easy to understand that the next halving event took place at a block height of 420,000. This happened a little under four years after the first Bitcoin halving, and occurred on July 10th 2016. At the time, block rewards fell from 25 to 12.5 Bitcoin per block.
Looking forward, the next halving will happen at block height 840,000. The trend line for Bitcoin halvings suggest that the next halving event will, therefore, likely take place a little under four years from now. This would put the halving sometime in March, April or May of 2024 - although this could change.
Many analysts believe that the Bitcoin halving could have a positive impact on the price of the premier cryptocurrency. Whether or not this ends up happening largely depends on whether the market is pricing in the decrease in supply.
Put simply, the market already knows that the Bitcoin supply will essentially be cut in half on May 12th. As such, a “stock-to-flow” (S2F) model suggests that the price should rise. However, progressive investors should already be including this upcoming decrease in supply in their valuations.
Nevertheless, there are indications for the Bitcoin 2020 forecast that suggest this price increase is still waiting to occur. First and foremost, the two previous Bitcoin halvings were also common knowledge. With that said, however, they were still the cause of substantial price increases.
Particularly, the first Bitcoin halving in 2012 saw Bitcoin’s price balloon to a high of $1,000 in November of 2013. The second Bitcoin halving, in 2016, set off a price rally that brought the premier cryptocurrency to $20,000 in 2017.
The reason why investors were not able to accurate “price in” the eventual surge in Bitcoin’s price earlier is simple. One can think of the Bitcoin halving as a “reminder” to investors that the supply of Bitcoin is quickly running out. As such, cutting crypto supply in half could likely lead to new price gains.
The above price chart shows Bitcoin’s impressive market performance in the wake of previous Bitcoin halvings. It is naturally hard to predict any future market move with absolute uncertainty, however, these past performances certainly lend credence to the notion that Bitcoin has more to give.
Furthermore, the cryptocurrency community is abuzz with various lofty predictions of astronomically high Bitcoin prices following the 2020 halving. Until it actually happens, it is virtually impossible to know for sure how the market will respond to it. However, it can still be interesting to take a look at some of the Bitcoin halving predictions.
Many technical analysts subscribe to the “stock-to-flow”, or S2F, method of valuing an asset. This suggests that a decreasing supply will positively affect the price of said asset. S2F models are, therefore, objectively bullish on Bitcoin’s price performance.
However, some of these price predictions are particularly ambitious. As such, it can be interesting to take a look at some of the most well-known or outlandish Bitcoin halving predictions. Where do you think Bitcoin will end up following the 2020 halving? Take a look at what some analysts think and have a guess!
One notorious Bitcoin halving prediction is that by crypto analyst “PlanB”. PlanB is bullish on Bitcoin’s post-halving performance, and said that the premier cryptocurrency will rally to a price point of a whopping $100,000 by December 2021.
As if that was not radical enough, however, PlanB recently came out with an even more aggressive Bitcoin halving prediction. Using a version of a stock-to-flow model which he calls S2FX, PlanB said Bitcoin could surge to an average price of $288,000. Moreover, PlanB suggests this could happen as soon as this year.
No list of Bitcoin halving predictions would be complete without including Dave the Wave, however. Dave the Wave is a Bitcoin analyst and strategist who believes that the price of Bitcoin could rally to $110,000.
This is due in part, according to Dave the Wave, to the Bitcoin halving and Bitcoin’s “boom and bust cycle”. As such, he suggests Bitcoin will reach a price of $110,000 during the end of 2022. Consequently, the price of Bitcoin would rally following the 2020 Bitcoin halving - and as Bitcoin’s volatility falls.
Nevertheless, this is not the most outlandish Bitcoin prediction. Rather, John McAfee - of antivirus and internet security fame - suggests that Bitcoin will go on to hit $1 million per coin.
This massive price increase would dwarf anything previously seen, but is not entirely impossible. One should keep in mind that Bitcoin’s past price rallies were also extremely unpredictable. Any price rally that takes place after May 12th will in part be driven by the 2020 Bitcoin halving’s effects.
Although most are currently focusing on the upcoming Bitcoin halving event, they should still keep in mind the 2024 halving. Although May 2020 will see Bitcoin rewards cut in half from 12.5 coins per block to 6.25, 2024 is worse.
The 2024 Bitcoin halving is not technically set for 2024. Rather, it will take place when the Bitcoin block height reaches 840,000. At the moment, it appears that this event is set for late April of 2024. However, it is entirely possible that this will shift to either March or May of 2024, if not even more.
Whenever it does take place, the Bitcoin halving 2024 will arguably cut the fresh supply of Bitcoin even more noticeably. Although the event will still reduce the block rewards by 50% (i.e. “halving” it), the 2020 Bitcoin halving means it will effectively be 25% of the current rewards.
2024’s Bitcoin halving event will see the block reward sink to merely 3.125 coins per block. This means the Bitcoin halving 2024 will reduce the reward to just 6.25% of what it was in 2012. The 2024 halving, or the fourth Bitcoin halving, will demonstrate even more clearly how rewards are dropping.
Naturally, the following halvings will continue to cut the Bitcoin block rewards in half. This means that the Bitcoin halving 2024 is far from the last one. Instead, the rewards will keep halving for over another century.
The 2020 Bitcoin halving is a momentous event for the cryptocurrency industry. It can be seen both as a sign of maturity as well as a bullish signal. However, for those who really wish to understand the Bitcoin halving, they need to look into the intricacies of it.
This guide answers both the questions “what is the Bitcoin halving” and “when is the Bitcoin halving”. It will be interesting to keep an eye on the cryptocurrency industry and markets following May 12th, when the 2020 Bitcoin halving will take place.