The recent occurrence of Bitcoin’s halving event in 2024 has sparked considerable speculation among experts, with many anticipating that it will catalyze a surge in the value of the digital currency.

Traditionally, the halving event, which transpires approximately every four years, has been relatively obscure. However, its significance lies in its impact on Bitcoin’s supply dynamics. Essentially, the halving reduces the rate at which new bitcoins are created, thereby increasing their scarcity. This scarcity principle typically drives up the price of Bitcoin, as the diminished supply tends to enhance its perceived value.

Interestingly, since the previous halving in 2020, Bitcoin has witnessed a notable uptick in adoption. This surge in adoption extends beyond just heightened awareness among the general populace; major Wall Street institutions have also begun investing in Bitcoin and offering various investment vehicles tied to the digital currency.

Consequently, Bitcoin has experienced a remarkable surge in value, reaching a record high of over $70,000 just last month, albeit experiencing some retracement since then.

This upward momentum has prompted cryptocurrency investors to forecast a potentially remarkable rally for Bitcoin in the coming year. However, the question remains: will this anticipated rally materialize? And what are the broader implications of these developments? Here’s what you need to understand.

 

What is the halving?

Initially, let’s address the nomenclature. Within the cryptocurrency realm, the term “halving” is not universally embraced, yet it succinctly captures the essence of the event.

At its core, the halving pertains to Bitcoin mining, akin to the operations of geological miners scouring the earth for precious metals like diamonds or gold. Similarly, bitcoin miners engage in the task of uncovering something concealed—in their case, solving complex mathematical equations to reveal new bitcoins. This process culminates in the creation of a “block,” which is subsequently added to the decentralized public ledger known as the blockchain.

The race among miners hinges on cracking these intricate equations to secure a substantial reward in bitcoins. However, the pivotal aspect is that this reward undergoes periodic reduction. This intentional mechanism is ingrained in Bitcoin’s computational code.

Furthermore, the finite nature of Bitcoin is deliberately encoded within the system, with the total supply capped at 21 million tokens. Presently, over 19 million tokens have been generated. Each time 210,000 equations, or blocks, are successfully solved, a halving event transpires.

This halving not only extends the timeline for reaching the 21 million token limit but also tends to bolster Bitcoin’s valuation.

In Bitcoin’s nascent stages, miners received a bounty of 50 tokens upon equation resolution. This figure was halved to 25 during the inaugural halving in 2012, subsequently reduced to 12.5 in 2016. Since 2020, the reward has stood at 6.25 tokens—until the latest halving event occurred last Friday.

Consequently, miners will now receive 3.125 tokens upon successfully deciphering these intricate mathematical formulas.

 

Will the halving spark a rally in bitcoin?

Indeed, historical evidence suggests a noteworthy pattern.

In the aftermath of each of the preceding three halving events, Bitcoin experienced a remarkable surge, often in triple-digit percentage increments over the ensuing year, albeit not always instantaneously.

However, attributing the halving event itself as the primary catalyst has remained a subject of contention.

With the recent occurrence of the latest halving, this debate is poised to persist.

Certain experts contend that various other factors are poised to propel Bitcoin’s price upward, irrespective of the halving. Among these factors are the escalating adoption of Bitcoin and heightened speculation among traders.

Moreover, the introduction of spot Bitcoin exchange-traded funds (ETFs) by prominent investment firms like BlackRock this year has engendered heightened demand for the digital currency.

Consequently, proponents argue that this halving aligns fortuitously with Bitcoin’s prevailing circumstances.

Furthermore, enthusiasts of Bitcoin anticipate that the fervor surrounding the 2024 halving will not only foster increased awareness but also foster greater acceptance of the digital currency.

 

Will the halving cut bitcoin mining’s energy consumption?

This aspect presents yet another facet of contention.

Bitcoin mining entails an astonishing consumption of energy, although the precise magnitude remains subject to debate.

Certain perspectives posit that halving events will compel miners to intensify their computational efforts to crack the cryptographic puzzles, given the diminished reward of Bitcoin. Consequently, miners may ramp up their computational power to augment their token yields.

However, this interpretation is met with skepticism. Contrary arguments suggest that halvings incentivize miners to enhance their efficiency, considering the substantial costs associated with energy consumption. In this view, miners may pivot towards sustainable energy sources or optimize their computing infrastructure to achieve more with less power.

Furthermore, proponents argue that halvings could potentially mitigate energy consumption. As miners confronted with reduced token rewards opt to exit the market, the aggregate energy demand may diminish. Pursuing Bitcoin amid exorbitant energy expenses for modest token yields may become financially untenable for these operators.

This scenario mirrors the dynamics observed in the oil industry. As the availability of oil dwindles and extraction becomes more arduous, smaller enterprises may withdraw, unable to contend with the formidable resources and technological prowess of major oil conglomerates.

Nevertheless, irrespective of the unfolding dynamics, one certainty prevails: the prodigious energy expenditure entailed in Bitcoin mining will persist as a contentious subject of discourse for the foreseeable future.