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What is Bitcoin halving?
Bitcoin halving refers to a predetermined event, occurring roughly every four years, that halves the reward Bitcoin miners receive for validating transactions. The first three halving events occurred once every 210,000 blocks mined, and will continue until the maximum supply of 21 million Bitcoins has been generated by the network.
Halving events can have a significant impact on Bitcoin supply and demand dynamics, in turn potentially affecting the price of the cryptocurrency. Therefore, it’s key for crypto traders to understand market sentiment and prepare for potential volatility during these periods.
When is the next Bitcoin halving event?
The next Bitcoin halving event is expected to take place on 19-20 April 2024. On this date, the number of blocks mined will hit 740,000, and the reward issued for validating transactions will fall from 6.25 to 3.125 Bitcoins.
How can halving affect Bitcoin traders?
When a Bitcoin halving event happens, the value of the reward issued to miners decreases by 50% as mentioned above. This may disincentivise further mining and compromise future supply of Bitcoin, potentially causing its value to increase. In the short term, a lower rate of new supply combined with continued or increased demand can mean even small changes in market sentiment may have an outsized impact on price action.
Recent halving events have increased the exposure of Bitcoin and other cryptos in the press and culture, as market participants react to price swings and news items. However, it’s important to note that past results are not a reliable indicator of future price movements.
Why does Bitcoin halving occur?
The Bitcoin halving event is said to have been designed to control the future supply of the cryptocurrency. The intention is to mimic the scarcity and incremental difficulty over time of mining commodities like precious metals, with the theoretical effect being to prevent inflationary pressures and enable the potential of Bitcoin’s value increasing. This may incentivise adoption and the long-term holding of the asset.
Why trade the Bitcoin halving with CFDs?
You can trade the Bitcoin halving by speculating on the price of the cryptocurrency, whether long or short, using CFDs. This method means that rather than owning Bitcoin outright, you’re taking a position on the directional movement of the underlying market.
Here are the main reasons many traders choose Bitcoin CFDs over ownership of the asset.
Leverage: CFDs allow you to use leverage, amplifying the exposure to price movements while minimising the outlay. With leverage, you only have to put down a small percentage of the value of the trade (known as the margin), while gaining exposure to the whole value of the trade. This can potentially lead to higher profits, but also involves higher risk of losing your money.
Short selling: CFDs allow you to speculate on the price of the asset falling as well as rising.
No need for wallet or an exchange: trading CFDs means you don’t own the underlying asset, removing the need to navigate wallets and exchanges, and making cryptocurrencies available to trade alongside your other favourite asset classes.
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How Bitcoin responded to previous halving events
The images below show the three previous Bitcoin halving dates, and the price action of Bitcoin in the timeline following the events.
First halving: 28 November 2012
Following the first halving on 28 November 2012, the Bitcoin price rose steadily from around $12 to around $230 in April 2013, before dropping mid-April to around $70.
Second halving: 9 July 2016
Following the second halving on 9 July 2016, the Bitcoin price initially fell from around $650 to around $485 on 3 August, before gradually rising again to $800 by mid December, and moving sharply up past $1,000 as the new year came in.
Third halving: 11 May 2020
Following the third halving on 11 May 2020, the Bitcoin price initially rose slightly from around $8,275 to hover around the $9,250 mark until July, when it increased to around $11,275. By December though, it had surged past $20,000, and in another giant move, past $30,000 at the turn of 2021.
Past performance is no indication of future results. Source: Yahoo Finance
Predictions for Bitcoin
It’s worth noting that the Bitcoin price can be extremely volatile, and predictions for its behaviour can therefore be unreliable. Bitcoin halving price predictions based on research from the cryptocurrency exchange Bitget,* conducted in November and December 2023, reveal that approximately 53% of investors globally anticipated the price fluctuating between $30,000 and $60,000 following the fourth halving event, while 30% believed it may break $60,000.
Latin America stood out as a particularly optimistic market about the next Bitcoin halving, with 46% of investors expecting prices to exceed $60,000 and 49% thinking it will range between $30,000 and $60,000.
However, since the research was conducted, as of 29 February 2024, the price has exceeded $60,000.
*Research was based on responses from 9,748 global cryptocurrency investors during November and December in 2023. Predictions are no indication of future outcomes.