Could the upcoming bitcoin halving drive bitcoin prices to new all-time highs, or is bitcoin headed for another bear market?
On April 19, something is expected to happen to bitcoin that has only occurred three times previously: a halving. During bitcoin’s first four years, roughly 2.7 million bitcoins were created each year. Then, on November 28, 2012, the first halving occurred. For the next four years, the number of new bitcoins dropped to around 1.5 million.
The second halving occurred on July 9, 2016, which dropped annual minting of new bitcoin to around 680,000. The most recent halving happened on May 11, 2020. Since that time, the number of new bitcoins further slowed to around 330,000 per year.
Market Rallied After Past Halvings
The three previous halvings were followed by rallies in bitcoin prices. In the 365 calendar days after the 2012 halving, bitcoin prices soared 8447%. In the 365 days following the 2016 halving, bitcoin prices rose by 290%. In the 365 days after the 2020 halving, bitcoin prices rose by 559%. However, even within the rallies, bitcoin prices remained volatile and experienced corrections of 20%-35% or more.
Bitcoin Growth Steadies
There is no guarantee that bitcoin will rally in response to its upcoming halving. Over time, bitcoin has been losing upward momentum as growth in its user network has slowed. In the beginning, the number of transactions per day was growing exponentially but that growth slowed after 2016.
However, recent interest in bitcoin ETFs has pushed up transaction volumes which might, along with the upcoming halving, give bitcoin yet another lift.
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