This year is a “leap year”, and tomorrow will be February 29th, which only occurs once every four years. Do you know why Bitcoin halving also occurs every four years?
(Previous summary:
Bitcoin skyrocketing signal! The amount of coins held by exchanges before halving has dropped to a 5-year low.
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(Background:
Gray Scale Report: Countdown to Bitcoin Halving in 2024, what’s different this time?
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Table of Contents
Why does Bitcoin halving occur every four years?
How long until the fourth Bitcoin halving?
Review of past halving trends
VanEck analyst: Bitcoin will reach a new high by the end of this year
This year is a leap year that occurs once every four years. In 2024, February will have an extra day. The reason for this is that it takes about 365.24 days for the Earth to orbit the Sun (one solar year). However, our calendar year only has 365 days. To compensate for this difference, an extra day, February 29th, is added every four years so that the calendar year stays in sync with the solar year.
Now that we understand the calculation of the calendar, have you ever wondered why “Bitcoin halving” also occurs every four years? We know that by halving the Bitcoin mining reward (mining reward will be reduced to zero in 2140), the new Bitcoin supply can be controlled, and it helps Bitcoin become a scarce and valuable asset. As for why halving occurs every four years, it is because of Satoshi Nakamoto’s design. Halving occurs every 210,000 blocks (approximately every 10 minutes per block). Therefore, the next Bitcoin halving is expected to occur in April 2024 when the block height reaches 840,000.
According to the latest data from Bitcoin Block Half, as of the time of writing, there are approximately 53 days left until Bitcoin halving. At that time, the Bitcoin reward per block will decrease from the current 6.25 coins to 3.125 coins.
So far, there have been three halvings, which took place in 2012, 2016, and 2020.
Bitcoin halving can become the background of a bull market narrative because it increases scarcity, which is believed to help boost the price in the market. However, according to statistics, past halvings usually do not immediately trigger a Bitcoin price surge. It takes several months to a year and a half to ferment:
First halving: In 2012, about 12 months after the peak (November 2013), the price surged by 8450%.
Second halving: In 2016, about 17 months after the peak (December 2017), the price surged by 290%.
Third halving: In 2019, about 18 months after the peak (November 2021), the price surged by 560%.
Does each Bitcoin surge really have something to do with halving? Coinbase analyst David Duong previously wrote a report summarizing the background of the three previous Bitcoin halvings, pointing out that the Bitcoin halving events coincidentally occurred at the same time as some important historical currency and fiscal policies:
In 2012, the Federal Reserve began the third round of quantitative easing (QE3), purchasing mortgage-backed securities and long-term government bonds.
In the second half of 2016, Brexit caused fiscal concerns in the EU and the UK, leading to an increase in BTC purchases.
In 2020, central banks and governments around the world implemented unprecedented fiscal stimulus to cope with the COVID-19 pandemic, which boosted global liquidity.
Therefore, he believes that in addition to focusing on the supply and demand dynamics of BTC, investors also need to understand the market background and be aware of the impact of the US dollar trend, interest rates, and global liquidity.
VanEck analyst estimated in December last year that the approval of a Bitcoin spot ETF combined with the halving event will stimulate Bitcoin to reach a historical high in the fourth quarter of this year. From the chart below, VanEck defines the fourth cycle of Bitcoin as 2022-2025 and divides it into three scenarios (Low, Moderate, Bullish). In the Bullish scenario, VanEck estimates that Bitcoin will reach a peak value of $160,000.
But whether history can truly repeat itself still needs time to prove. Investors are reminded to manage risks properly.
Related reading:
How high can Bitcoin fly in 2024? This institution boldly predicts “$500,000”.
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