Here's What Could Happen After The Bitcoin Halving

Written by

Eddie Mitchell

Cryptocurrency Writer

Published Feb 16, 2024 at 4:46 PM
Last updated Feb 16, 2024 at 4:46 PM

2024 is set to be a very pivotal year for crypto and blockchain, as Bitcoin (BTC) is preparing to have its fourth halving event in April 2024.

With the market seemingly in pre-halving hype, we’ll be taking a look at what could happen in the weeks and months after.

Bitcoin price surge

Every four years, the halving makes it harder to mine BTC as the power required to mine increases, and the amount of BTC earned from the block reward reduces. This increases scarcity by lowering the supply, which is often met with higher demand.

This year, the mining reward will be lowered to just 3.125 BTC.

This has historically seen the price of BTC witness absurd gains. The price of a BTC was around $13 prior to the first halving in November 2012, and in the following year, it peaked at over $1,000. The same happened with the second and third halvings as you can see in the graph below.

BTC halving and price spikes. Source: Medium

Current trends would suggest that we are presently in a pre-halving market hype, with BTC now coasting above the $50,000 price tag at the time of writing on 16 February, and having re-taken the absurd $1trillion market capitalization.

BTC monthly chart. Source: CoinMarketCap
The landscape of crypto is almost completely different today than it was four years ago, as BTC now exists as a major financial instrument with the approval of spot BTC exchange-traded funds (ETFs) in the United States earlier this year. This now opens up the doors to major financial institutions and other highly regulated entities looking to purchase BTC through a traditional financial institution.

Naturally, investors and analysts anticipate that the next halving will have a positive impact on the overall crypto market, with bullish analysts speculating that the price of BTC could surpass $100,000 by the end of this year. Conversely, when the dust has settled it may even bring in a period of heightened volatility, a myriad of new crypto projects and tokens that will oversaturate the market, and a price plunge that will cause yet another crypto winter.

Crypto and blockchain industry impacts

In the past, Bitcoin halvings and the following bull runs on the market brought in new technologies, projects, and sectors to the bustling world of crypto and Web3. 

In 2012, BTC became a household name as exchanges and infrastructure began to build around it. In 2016 and 2017 it was the initial coin offering (ICO) mania, and over 2020/21 we saw decentralized finance (DeFi), non-fungible tokens (NFTs), and the metaverse reach mainstream popularity.

A post-halving bull run would give a lot of projects that had been working away in the background throughout the years a major financial boost, and competition would be fierce. 

Miner impact

Miners face short-term challenges with every halving. This time, however, fundamentals such as on-chain activity and the positive market structure (particularly thanks to spot BTC ETFs), make this halving a little different to the ones prior.

Miners have high production costs and are now facing even lower rewards, but the rise of price in BTC or an increase in fees could offset the impacts almost entirely. In addition, Bitcoin Ordinals, which are essentially Bitcoin-based non-fungible tokens (NFTs), generated hundreds of millions in fees for BTC miners, and their popularity only seems to be increasing.

Bitcoin total transaction fees - 16.02.24
Furthermore, miners are economically savvy in 2024 and are anticipating this change. According to analysis from Grayscale, miners have braced for the worst by selling off reserves and raising funds through equity/debit issuances.

So long as miners are able to break even, or at least profit from their efforts, miners will continue to support the network, and this is unlikely to change.

Ethereum (ETH)

Ethereum came into existence just a year before the second halving. Prior to the halving, ETH was trading at around $14, falling to just over $11 three months later. In the lead-up to the third halving ETH had dropped around 25% to approximately $160 but in the three months following it rose to a price of $398, an increase of over 88%.

BTC ETH chart. Source: Glassnode
Though the graph above shows that ETH has shared in the gains made by BTC, it also displays slightly larger pre-halving dips and prolonged recovery periods for ETH. 

The effects of BTC halvings can have varying effects on the ETH token and its entire altcoin ecosystem. Interestingly, while halvings create bullish sentiment, the specific price impacts are somewhat unpredictable due to the thousands of tokens and projects that exist on Ethereum.

ETH one-year chart. Source: CoinMarketCap
Though their prices are highly correlated, the market is once again centred around BTC with ETFs and the upcoming halving pushing Bitcoin upwards. Seemingly, ETH is yet to break from its bearish patterns. Currently trading at $2,784 as of 16 February, Ethereum appears to be falling behind BTC, but that is not the case.

Bitcoin ETFs and the halving will continue to boost BTC for the rest of the year, but Ethereum is set to implement proto-danksharding and full danksharding that will see the network capable of handling over 100,000 transactions per second, amongst other updates and overhauls, which is likely to drive fresh capital into Ethereum.

There is also the push for spot ETH ETFs to be approved now that BTC has become an institutionally recognized asset. Although history may not repeat itself here, historical trends suggest that ETH holders may just need to wait a matter of months following the halving to see if it can retake its former all-time high (ATH) of over $4,600.

Bitcoin halving effect on altcoins

As you can tell, BTC halvings always affect altcoins. Though it is not guaranteed that it will be a positive one either in the short or long term, there’s plenty of evidence to suggest that altcoins will respond in one way or another.

Top-performing networks with separate ecosystems of altcoins such as Ethereum, and Solana (SOL) will be one to watch in the months after the halving.

Frequently Asked Questions

When is Bitcoin halving?

Bitcoin (BTC) halving events take place every four years. The fourth Bitcoin halving event will take place at the end of April 2024.

 

 

How will Bitcoin halving affect altcoins?

Bitcoin halving typically has a typically positive impact on the overall cryptocurrency market in the months before and after the event. It is predicted that many altcoins will benefit from the 2024 Bitcoin halving.