fi en false false

Bitcoin Halving Explained: History, Impact, & 2024 Predictions

20 April 2024

Read Time 6 MIN

This blog simplifies the Bitcoin halving, examines price trends before and after past cycles, and offers our prediction for the 2024 halving.

Please note that VanEck may have a position(s) in the digital asset(s) described below.

The last Bitcoin halving happened on 20th of April this year, bringing opportunities and uncertainties for the Bitcoin community. This event, built into Bitcoin's foundational code, changes the rewards for miners and could significantly influence Bitcoin's value and role within the broader ecosystem.

The Bitcoin Halving Cycle Explained

Bitcoin halving is a critical event in the world of Bitcoin that impacts investors and others involved with it. About every four years, the reward for mining new Bitcoin blocks is cut in half. This is done to control the supply of Bitcoin and make it more like scarce resources such as gold. The halving helps keep Bitcoin's value stable over time by reducing the rate at which new Bitcoins are created.

Bitcoin halving was introduced by its creator, Satoshi Nakamoto, to control inflation and ensure the digital currency remains a deflationary asset. Initially, miners received 50 bitcoins as a reward for processing transactions and supporting the blockchain network. After the first halving in 2012, this reward was cut to 25 bitcoins, and it has halved subsequently at regular intervals, with the reward decreasing further each time.

Bitcoin's halving history is interesting, showing its growth from its beginnings in 2009. Since then, Bitcoin has experienced several halving events, each one playing a big part in its development.

  1. The first halving (November 2012): The inaugural Bitcoin halving occurred when the network reached 210,000 blocks. The mining reward was reduced from 50 to 25 bitcoins per block. This event marked the first test of Satoshi’s theory of controlled money supply and deflationary economics. Despite initial uncertainties, the Bitcoin network remained stable, and the aftermath saw the price of Bitcoin catapult from $10.59 to $126.24 within 180 days, reinforcing the viability of its underlying economic principles.
  2. The second halving (July 2016): With bitcoin firmly established in the public consciousness, the second halving reduced the block reward to 12.5 bitcoins. This period saw the rise of cryptocurrency as a legitimate investment class, with increasing participation from both retail and institutional investors. Following this halving, bitcoin experienced a significant rise, peaking at over $1002.92 and laying the groundwork for the bull run of 2017.
  3. The third halving (May 2020): The last halving reduced the reward to 6.25 bitcoins per block. Occurring amid global economic uncertainties due to the COVID-19 pandemic, this halving was watched closely by investors worldwide. It played a crucial role in bitcoin’s remarkable performance through 2020 and into 2021, with the cryptocurrency reaching new all-time highs of $14,849.09 within 180 days and becoming a focal point of discussions around digital currencies’ role in the future of finance.
2012 30 days before Day after 30 days after 180 days after
Bitcoin Price $10.59 $12.45 $13.42 $126.25
Hash Rate (Terahash) 22.532T 27.053T 24.271T 106.334T
30 Day Volatility 56.80 34.85 27.18 132.9
Miner outflows to Exchanges (seven day moving average) (BTC) 63.39 17.70 5.40 40.76

2016 30 days before Day after 30 days after 180 days after
Bitcoin Price $577.07 $651.30 $591.59 $1002.9
Hash Rate (Exahash) 1.560E 1.658E 1.478E 2.199E
30 Day Volatility 40.08 97.29 48.23 54.73
Miner outflows to Exchanges (seven day moving average) (BTC) 713.83 227.02 145.96 240.78

2020 30 days before Day after 30 days after 180 days after
Bitcoin Price $6852.50 $8800.73 $9870.79 $14849
Hash Rate (Exahash) 116.498E 116.840E 111.554E 122.967E
30 Day Volatility 157.59 75.26 48.77 45.74
Miner outflows to Exchanges (seven day moving average) (BTC) 293.67 484.54 167.71 219.84

2024 30 days before Day after 30 days after 180 days after
Bitcoin Price $67880.97 - - -
Hash Rate (Exahash) 617.620E - - -
30 Day Volatility 66.09 - - -
Miner outflows to Exchanges (seven day moving average) (BTC) 86.26 - - -

Source: Glassnode as of 10/04/2024. Past performance is not a guarantee of future results. Not intended as a recommendation to buy or to sell any of the securities mentioned herein. A Terahash represents 1 trillion hashes per second. A Exahash represents 1 quintillion hashes per second. Past performance is not a guarantee of future results.

Bitcoin’s most explosive gains are typically post-halving

Bitcoin's most explosive gains are typically post-halving

Source: Glassnode as of 4/0/2024. Past performance is not a guarantee of future results. Not intended as a recommendation to buy or to sell any of the securities mentioned herein. A Terahash represents 1 trillion hashes per second. A Exahash represents 1 quintillion hashes per second. Past performance is not a guarantee of future results.

The forthcoming halving promises to be a watershed event, with the reward diminishing to 3.125 bitcoins per block. This moment is expected to profoundly impact the mining landscape, potentially reshaping profitability metrics and accelerating technological advancements in mining efficiency. Historical precedents suggest a period of adjustment as miners navigate the reduced incentives, with potential implications for the network’s hash rate and overall security.

Historically, the hash rate (the total computational power dedicated to mining and processing transactions) dips after a halving as unprofitable miners disconnect, but it tends to recover within weeks. This is because the halving reinforces Bitcoin's scarcity, potentially driving up the price and increasing profits for those able to keep mining. If the price increase outpaces the reward reduction, as has been the case in the year after each prior halving, mining can remain profitable, even with fewer coins per block. This is because the survivors pick up the network's market share as others exit. Additionally, the halving incentivizes miners to invest in more efficient equipment to stay competitive. So, the hash rate tends to experience a temporary dip, followed by a rise in efficiency and overall hash rate in the long run.

That is why we suggested in our 2024 predictions piece that investors underweight bitcoin miners in the six months prior to halving, as the market generally discounts the first-order effect of higher costs. Miners often issue lots of capital during this tricky period. Post-halving, some miners may be forced to shut down, leading to a potential short-term decrease in the network's hash rate – the combined computational power dedicated to mining.

That said, the impact on bitcoin miners will vary. Power costs associated with running energy-intensive mining equipment make up the largest expense for miners, typically accounting for 75-85% of a miner’s total cash operating expenses. Current power costs for the listed universe average around $0.04/kWh. At this cost, we estimate the all-in cash costs of the top 10 listed miners will be about $45k/bitcoin post-halving. Larger miners with lower per-coin costs will see their margins shrink but likely remain profitable, especially if the price of bitcoin appreciates. We believe the halving will likely lead to consolidation within the mining industry, with smaller miners being squeezed out and larger players expanding their market share. However, this trend is already in place, as publicly traded miners now control a record % of the hash rate. Historically, bitcoin mining equities have recovered strongly post-halving and outperformed the spot price in halving years.

The Future of Bitcoin Post-Halving

As mining rewards decrease, transaction fees may become more important for miner profitability. The halving emphasizes Bitcoin's scarcity, attracting investment and speculation. It reaffirms Bitcoin's principles as a decentralized, limited, and secure asset, shaping its role in the evolving financial landscape.

Links to third party websites are provided as a convenience and the inclusion of such links does not imply any endorsement, approval, investigation, verification or monitoring by us of any content or information contained within or accessible from the linked sites. By clicking on the link to a non-VanEck webpage, you acknowledge that you are entering a third-party website subject to its own terms and conditions. VanEck disclaims responsibility for content, legality of access or suitability of the third-party websites.

To receive more Digital Assets insights, sign up in our subscription center.

Important Information

This is not financial research but the opinion of the author of the article. We publish this information to inform and educate about recent market developments and technological updates, not to give any recommendation for certain products or projects. The selection of articles should therefore not be understood as financial advice or recommendation for any specific product and/or digital asset. We may occasionally include analysis of past market, network performance expectations and/or on-chain performance. Historical performance is not indicative for future returns.

For informational and advertising purposes only.

This information originates from VanEck (Europe) GmbH, Kreuznacher Straße 30, 60486 Frankfurt am Main. It is intended only to provide general and preliminary information to investors and shall not be construed as investment, legal or tax advice. VanEck (Europe) GmbH and its associated and affiliated companies (together “VanEck”) assume no liability with regards to any investment, divestment or retention decision taken by the investor on the basis of this information. Views and opinions expressed are current as of the date of this information and are subject to change with market conditions. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results. VanEck makes no representation or warranty, express or implied regarding the advisability of investing in securities or digital assets generally or in the product mentioned in this information (the “Product”) or the ability of the underlying Index to track the performance of the relevant digital assets market.

The underlying Index is the exclusive property of MarketVector Indexes GmbH, which has contracted with CryptoCompare Data Limited to maintain and calculate the Index. CryptoCompare Data Limited uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards the MarketVector Indexes GmbH, CryptoCompare Data Limited has no obligation to point out errors in the Index to third parties.

Investing is subject to risk, including the possible loss of principal up to the entire invested amount and the extreme volatility that ETNs experience. You must read the prospectus and KID before investing, in order to fully understand the potential risks and rewards associated with the decision to invest in the Product. The approved Prospectus is available at www.vaneck.com . Please note that the approval of the prospectus should not be understood as an endorsement of the Products offered or admitted to trading on a regulated market.

Performance quoted represents past performance, which is no guarantee of future results and which may be lower or higher than current performance.

Current performance may be lower or higher than average annual returns shown. Performance shows 12 month performance to the most recent Quarter end for each of the last 5yrs where available. E.g. '1st year' shows the most recent of these 12-month periods and '2nd year' shows the previous 12 month period and so on. Performance data is displayed in Base Currency terms, with net income reinvested, net of fees. Brokerage or transaction fees will apply. Investment return and the principal value of an investment will fluctuate. Notes may be worth more or less than their original cost when redeemed.

Index returns are not ETN returns and do not reflect any management fees or brokerage expenses. An index’s performance is not illustrative of the ETN’s performance. Investors cannot invest directly in the Index. Indices are not securities in which investments can be made.

No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of VanEck.

© VanEck (Europe) GmbH

Important Disclosure

This is a marketing communication. Please refer to the prospectus of the UCITS and to the KID before making any final investment decisions.

This information originates from VanEck (Europe) GmbH, which has been appointed as distributor of VanEck products in Europe by the Management Company VanEck Asset Management B.V., incorporated under Dutch law and registered with the Dutch Authority for the Financial Markets (AFM). VanEck (Europe) GmbH with registered address at Kreuznacher Str. 30, 60486 Frankfurt, Germany, is a financial services provider regulated by the Federal Financial Supervisory Authority in Germany (BaFin).

The information is intended only to provide general and preliminary information to investors and shall not be construed as investment, legal or tax advice VanEck (Europe) GmbH, VanEck Switzerland AG, VanEck Securities UK Limited and their associated and affiliated companies (together “VanEck”) assume no liability with regards to any investment, divestment or retention decision taken by the investor on the basis of this information. The views and opinions expressed are those of the author(s) but not necessarily those of VanEck. Opinions are current as of the publication date and are subject to change with market conditions. Certain statements contained herein may constitute projections, forecasts and other forward-looking statements, which do not reflect actual results. Information provided by third party sources is believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. Brokerage or transaction fees may apply.

All performance information is based on historical data and does not predict future returns. Investing is subject to risk, including the possible loss of principal.

No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of VanEck.

© VanEck (Europe) GmbH / VanEck Asset Management B.V.