Roughly every four years, about 210,000 blocks are mined. When this occurs, the reward that Bitcoin miners get per block is halved. These Bitcoin halving events help keep the cryptocurrency valuable by making it more scarce, but they also tend to increase volatility. That volatility could reach new highs in the upcoming 2024 halving.
As Bitcoin’s popularity keeps growing, these halving events are becoming more significant. By 2024, Bitcoin could go mainstream as a widely accepted currency, so the halving would be more impactful than ever before.
Here’s a closer look.
Past Bitcoin Halvings
Bitcoin halvings are nothing new, with the last one happening in May 2020. Trends between these events have been pretty consistent. As miners earn less per block, Bitcoin’s supply drops, leading to a surge in its price. While you may think that half the supply would translate to double the demand, these price jumps have been much bigger than that.
Take the last Bitcoin halving, for example. On the day of the halving, one bitcoin was worth $8,787. A year later, a bitcoin was worth $54,276, a 517% increase on halving day price.
That year wasn’t an anomaly, either. The price of one bitcoin rose from $647 during the 2016 halving to $19,800 a year later, a 506% increase. Bust cycles typically imitate these booms as well.
While Bitcoin hasn’t shown sensitivity to equity volatility, it can still be remarkably volatile, especially around halving events. With past halvings, the cryptocurrency’s value has fallen in the years that follow, usually two years after.
Between 2017 and 2018, Bitcoin lost 83% of its value, dropping to $3,250. After the 2012 halving, the same thing happened. Prices soared in 2013, only to fall 83% just over a year later.
What Makes This Halving Special?
If these past Bitcoin halvings suggest anything, prices could surge in 2025 then fall again in 2026. However, there are many more people trading cryptocurrency today than there were in the past. Consequently, this upcoming halving could hit the market much harder.
Many experts predict one bitcoin could be worth more than $100,000 in 2025 when it will likely peak after the 2024 halving. Imagine prices then fall 83% again, as they have after two prior peaks. While the percentage loss may be nothing new, 83% of $100,000 is worth a lot more than 83% of 19,800.
If the 2024 halving follows similar patterns as previous ones, some investors could lose a considerable amount of money. While the price won’t likely dip below its pre-peak low point, it will still be a substantial drop, and higher prices, that drop will hit harder, which could throw the market into a frenzy with more people involved.
There are also increasing regulations to consider. As cryptocurrency has gained more mainstream appeal, more countries have started to regulate it. Even in the U.S., which has comparatively few crypto regulations, you now have to pay taxes on crypto transactions.
Since crypto counts as property for tax purposes transactions, volatility has significant tax implications. High peaks mean investors have to pay more in capital gains, and taxpayers can count dramatic falls as capital losses. The high volatility that will almost certainly surround the 2024 Bitcoin halving could make reporting and tax considerations complicated.
Bitcoin Halvings Create Increasing Complications
If the past is any indication, the Bitcoin market will eventually level out after the 2024 halving. However, investors should expect high volatility leading up to and after the event. From 2024 to 2026, the cryptocurrency market could see massive shifts in both directions, causing widespread confusion and even panic.
Cryptocurrency is volatile, and this volatility will have an increasing impact as crypto’s popularity and prices grow. When you understand that, you can make more informed trading decisions, but it can be a challenging market if you don't.
Don’t let the upcoming halving blindside you.