Bitcoin Halving 2024: What Investors and Miners Need to Know

The cryptocurrency bitcoin is expected to halve in April. This technical detail, written in bitcoin code, happens every four years, when, quite simply, the value of new bitcoins created is cut in half.

The purpose is to reduce the time it takes to create new bitcoins and then enter the market. Since there will never be more than 21 million bitcoins, the discriminating process creates an even greater scarcity of the digital currency.

So-called “miners” get bitcoins, called block rewards, by solving complex mathematical problems to confirm and validate transactions, as well as helping to keep the blockchain network secure.

In 2009, “miners” received 50 bitcoins, in 2012 they received 25, in 2016 they received 12.5 and in 2020 they received 6.25 bitcoins for this operation.

Here’s what the upcoming new halving could mean for you as an investor and “miner”:

Here’s how it affects investors

Although the “halving” itself does not directly affect the price of bitcoin, investors’ expectations leading up to the halving can lead to unpredictable price movements, points out Douglas Bonepart to CNBC, president of Bone Fide Wealth. Bonepart has also had bitcoin since 2014.

“As the ‘half’ approaches, speculation usually increases, which can lead to more volatility in the bitcoin market,” he says. “Investors may buy bitcoin in the hope of a possible price increase, but there is no certainty or guarantee about that,” Boneparth emphasizes, adding that this may also increase volatility.

In addition, it is difficult to determine exactly what drives bitcoin changes and price reductions. Unlike stocks and bonds, cryptocurrency does not derive its value from an underlying asset.

This halving will create more scarcity, but because bitcoin doesn’t follow the normal rules of supply and demand, that doesn’t mean the price will rise, the professor said.

This is how it affects the “mines”

Now that the block reward will be reduced to 3.125, “miners” will receive $200,122 worth of bitcoin (as of April 19) for the same activity.

Because “mining” requires expensive equipment and a lot of energy, some “miners” have to weigh the cost against the potential payoff, said Columbia Business School professor Omid Malekan to the website.

Although “miners” can also earn income from transaction fees, they make most of their money from block rewards which are largely cut after the halving, he says.

“Maybe what will happen after the halving is that some ‘miners’ will no longer be profitable and will stop,” says Malekan.

Meanwhile, bitcoin is trading at all-time highs. At today’s rate, one bitcoin now costs NOK 710,000 against the best share of 772,000. However, not everyone is so careful in their estimates. According to CNBC, hedge fund manager Mark Yusko expects the price of bitcoin to rise to more than $150,000 within the year.