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What Is Bitcoin Halving, and Will It Take Prices to Another New High?

Bitcoin-Halving
Bitcoin-Halving

The next Bitcoin halving is projected to take place this week, around 19 April 2024. This major event can drastically affect the price of Bitcoin. 

Whether you’re considering investing in Bitcoin or already hold some in your portfolio, pull up a chair. Here’s everything you need to know about Bitcoin halving.

 

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What is Bitcoin Halving?

Before we discuss Bitcoin halving, we need to understand how Bitcoins are mined (the process by which new Bitcoins are generated).

Miners tackle complex mathematical problems to confirm transactions on the blockchain. In doing so, they add new blocks to the Bitcoin network. The system rules ensure that each newly mined block introduces new bitcoins into circulation.

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Currently, the reward for mining 1 block on the Bitcoin network is 6.25 BTC. When Bitcoin halving occurs, this reward is cut in half. This means miners receive 50% fewer bitcoins (or 3.125 BTC) for their efforts.

Bitcoin halving occurs roughly every four years (once every 210,000 blocks are mined). The event will continue until 21 million Bitcoins (the maximum supply) have been generated.

Event

Date

Blocks mined

Reward

Introduction of Bitcoin

3 Jan 2009

0

50 Bitcoin

1st halving

28 Nov 2012

210,000

25 Bitcoin

2nd halving

9 Jul 2016

420,000

12.5 Bitcoin

3rd halving

11 May 2020

630,000

6.25 Bitcoin

4th halving

~ 19 Apr 2024

740,000

3.125 Bitcoin

5th halving

~ Apr 2028

850,000

1.5625 Bitcoin

 


ALSO READ: Gold Prices Hit Record High—How to Invest in Gold in Singapore (2024)


 

How does Bitcoin halving affect investors (and potential investors)?

Remember that when the halving event occurs, the reward for mining Bitcoin is reduced by 50%. 

Miners will be less incentivised to mine and generate new Bitcoins, slowing the rate at which new Bitcoins are issued into circulation. This creates scarcity, and when there’s scarcity, demand increases.

Historically, whenever the halving event takes place, the price of Bitcoin surges.

Event

Price at time of halving

Following year’s peak

1st Halving

$13

$1,152 (+8761%)

2nd Halving

$664

$17,760 (+2574%)

3rd Halving

$9,734

$67,549 (+594%)

4th Halving

~$63,198

?

Will history repeat itself?

Since Bitcoin’s inception, there have only been 3 halving events. That’s a pretty small sample size on which to base predictions. But each time it occurred, the price of Bitcoin rocketed the following year (because they became more scarce and, therefore, more valuable).

To get expert insight on whether this will happen again, we’ve asked Hassan Ahmed, Country Director of Coinbase in Singapore, for his thoughts.

“While some investors may wish to extrapolate from past performance into the upcoming halving, investors should be cautious about accepting this at face value. There is currently only limited historical evidence about this relationship, making it speculative. Furthermore, Bitcoin does not operate in a vacuum and factors such as market sentiment, adoption trends, and macroeconomic conditions can contribute to price movements.” says Hassan.

It would serve investors well to heed his advice. The halving incident is just 1 of the many factors that can influence the price of Bitcoin. And as you know, past performance is no guarantee of future results.

 

I’m looking to invest in Bitcoin. What should I be aware of?

One word: volatility. Bitcoin, unlike other forms of investment like blue-chip stocks and ETFs (electronically traded funds), is often subjected to huge swings in price.

For context, let’s compare the price charts of the S&P 500 vs Bitcoin over the past five years.

Bitcoin

Bitcoin-Chart
Bitcoin-Chart

S&P 500

S&P500-Chart
S&P500-Chart

As you can see, Bitcoin’s price swings are much steeper, while those of the S&P 500 are more gradual. You need an iron gut—or a solid plan—to invest in Bitcoin, as your investments can drop (or rise) significantly in a short period of time.

If your risk tolerance isn’t high, and you still want to invest in Bitcoin, go slow. Try dollar-cost averaging (investing in fixed sums of money at regular intervals rather than one lump sum). 

Hassan says, “For some crypto investors, high volatility is part of the appeal—it creates the possibility for high returns. For less risk-tolerant investors, some strategies can be used to limit the downside impact of volatility, like dollar-cost averaging.”

 


ALSO READ: Cryptocurrency in Singapore: 7 Things to Know Before You Start Buying


 

How do I invest in Bitcoin?

The easiest way to buy Bitcoin is through a crypto exchange platform.

Some of the best cryptocurrency exchanges in Singapore are Coinbase, Gemini, Kraken, and Crypto.com. Explore our list of crypto exchanges in Singapore and compare their trading and buying fees.

Remember, Bitcoin isn’t the only cryptocurrency. There are lots of others you can consider, like Ethereum (ETH), Solana (SOL), and Binance Coin (BNB). Check out our cryptocurrency guide to learn all about the world of cryptocurrencies.

 

Do you know anyone interested in cryptocurrencies? Share this article with them!

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Original article: What Is Bitcoin Halving, and Will It Take Prices to Another New High?.

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