The Bitcoin Halving

Updated: May 21

The following article is an opinion piece by a guest author. Please note that we neither endorse any analyses published nor give you financial advice.

In the world of Bitcoin, mining is the process where new Bitcoin blocks are found by miners who verify transactions and add them to the blockchain. In order to do this, miners must provide computing power and are compensated with newly minted Bitcoin in return. This compensation is known as the block reward. The halving refers to a 50% reduction in block rewards to the miners that maintain the Bitcoin network. This occurs approximately every four years and the upcoming halving in May 2020 will cut the block rewards from 12.5 Bitcoin to 6.25 Bitcoin roughly every 10 minutes as each new block is found.

The Halving’s Potential Effect on the Price of Bitcoin

Miners are responsible for the largest amount of consistent selling pressure on the Bitcoin network since they need to raise cash by selling their Bitcoin to pay operating expenses. After the halving, block rewards are reduced by 50% causing some inefficient miners to shut off unprofitable machines. The freshly mined Bitcoin will now be allocated to the most efficient miners with strong balance sheets. The surviving miners will have healthier margins than before and may hold onto more of the Bitcoin they mine - reducing the amount of selling pressure on the price of Bitcoin. However this won’t happen instantaneously, but rather will take months to play out. In fact, since the halving will cut miner revenue in half while their costs remain constant, the sell pressure for Bitcoin is likely to increase in the coming months before normalizing and setting the stage for future price growth.

Previous Halving

The first halving for Bitcoin took place on November 28, 2012. The closing price that day was $12.22. Nearly 1 year after the initial halving, Bitcoin reached a new all time high of $1163 on November 30, 2013. The halving kicked off a bullish rally that represented a 9417% gain in the price of Bitcoin.

The second halving took place on July 9, 2016 and Bitcoin closed that day at $647.78. The halving set off a massive bull run that lasted nearly 1.5 years and propelled Bitcoin to its current all time high of $19,666 on December 17, 2017. This represented a 2936% rally following the second halving.

The table above shows price performance of Bitcoin from 12 months before to 12 months after each of the previous halvings. It also shows the date and price of the eventual peak following each post-halving rally. For the upcoming halving in May 2020, we made projections of the potential peak price based on the following assumptions: 1) A 43% lengthening of the Bitcoin cycle; and 2) A peak price percentage increase that is 69% less than the prior peak percentage change. Based on these assumptions, we forecast a peak price of around $87,600 in June 2022.

However, investors don’t need to be in a rush to purchase Bitcoin ahead of the halving. At the time of writing, we are approximately 10 days from the 2020 halving. Investors who bought Bitcoin 10 days before each of the prior halvings saw returns of 14.5% (2012) and -12.8% (2016) 30 days after the halving. The price of Bitcoin may face a pullback in the weeks or months following the halving since the global recession and tighter liquidity constraints may result in a higher likelihood of miner capitulation.

The Maturation of Bitcoin and the Cryptocurrency Industry

The cryptocurrency landscape has been vastly different at each halving date. During the first halving in November 2012, Bitcoin was still finding its place as an investable asset and there were very few exchanges to safely buy and sell the asset. There was still a lot of uncertainty around Bitcoin and whether or not it would ever be adopted and used by anyone outside of the early adopters. By the time the second halving occured in June 2016, Bitcoin had survived for 8 years and there had been some innovative developments within the cryptocurrency space. One of these developments was the creation of Ethereum - the first smart contract platform created using blockchain technology, which would later enable the ICO craze that resulted in the parabolic markets witnessed in 2017. Fast forward to 2020 and we have seen significant developments in the cryptocurrency industry over the past few years. The infrastructure for getting into and out of the crypto ecosystem has vastly improved, traditional financial firms are involved in the sector (Fidelity, ICE, CME, etc.), and government organizations around the globe are slowly but surely beginning to implement rules and regulations in order to encourage further innovation in the industry. With COVID-19 acting as the catalyst that sent shockwaves across the global economy and as governments and central banks continue to press forward with unprecedented monetary and fiscal policy, the stage is set for Bitcoin to act as a hedge for broad based currency devaluation. The timing of Bitcoin’s third halving could not be any better given what is currently happening in the global markets.


Although limited in its sample size, Bitcoin’s two prior halvings have led to significant price appreciation and new highs 12-18 months afterwards. The halving’s effect on price is less certain in the near term, but if history is any indication, it will at least drive bullish sentiment and bring attention to the industry. Given what is currently transpiring in the global economy, the stage is set for Bitcoin to gain mass appeal as a hedge against unsustainable monetary and fiscal policy. The halving may just be the catalyst to kick off this process and we look forward to watching it unfold in real time in May.



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