Will Bitcoin halving send BTCUSD higher?

by Efthymios Mesis, Product Manager at HYCM

The next Bitcoin halving is scheduled for April 2024. Many believe that this may not have any effect on Bitcoin price anymore. However, let’s explore the reasons why it might not be the case. This article explains what the halving does to BTC and provides the calculations and numbers illustrating what we can expect from the halving.

What is the $BTC halving?

The Bitcoin halving takes place every 4 years. This is when the reward for BTC mining is cut in half. Contrary to what many believe, when you mine BTC, you are not mining 1 BTC at a time. You are mining blocks on the BTC blockchain. A chain of blocks is created, where these blocks are stacked on top of each other, and this is why it is called a blockchain. So, the amount of BTC you receive in each block is cut in half every 4 years.

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How many BTC are in each block and how many are mined every day?

Currently, each block contains 6.25 BTC, resulting in around 900 new Bitcoins being mined every day. It’s important to consider that the majority of this newly mined BTC enters the market to be sold every day. At today’s prices, this amounts to 900 BTC x $26,000 = $23,400,000. This means approximately $23 million worth of sell pressure enters the market every single day. Over a week, that’s $163.8 million, and in a month, it’s around $700 million in sell pressure. One could argue that to maintain the current price of BTC, a buy pressure of $700 million should enter the Bitcoin market every month. As the price of BTC fluctuates, the sell pressure stemming from newly minted BTC also changes.

What may happen in April 2024?

At the next Bitcoin halving, which is scheduled for April 2024, the BTC block rewards may be cut in half. So, from 6.25 BTC per block, we will see 3.125 BTC in each block. This change will significantly impact the sell pressure originating from Bitcoin miners. The volume of fresh BTC entering the markets every day will decrease by half, from 900 BTC to 450 BTC. If, for instance, the price of BTC remains at $26,000, the required buy pressure to maintain the price would decrease to $350 million per month. What if we continue to witness $700 million in buy pressure?

How does this affect Bitcoin miners?

Miners receive transaction fees for each block they mine, in addition to the BTC that comes with the blocks (currently 6.25 BTC per block). On average, US miners spend at least $17,000 for each BTC, amounting to around $106,250 per block. With the current BTC price, they are generating substantial profits.

However, considering the upcoming BTC halving, it’s anticipated that they may not be as profitable if BTC’s price remains at the same levels. They will be making only half of their current profits, and it’s worth noting that mining a BTC block might become more challenging in the next halving, potentially raising the cost of each BTC to $35,000-$40,000, although, this cannot be confirmed.

Conclusion

To sum up, BTC miners will receive half of the rewards after the halving. Less sell pressure will come from miners every day. The cost of mining will likely increase, possibly even double.

How will this impact the price of BTC? It could potentially follow a similar pattern to what have been observed recently. The price will likely need to increase significantly, and reduced sell pressure will play a vital role in this. While some argue that the halving’s effect is already priced in, the calculations and facts above suggest otherwise. Also, it’s important to consider other factors like market sentiment and macroeconomic trends that might influence the mid-term and long-term prices.

While we can’t predict precisely how all these factors will affect the price of Bitcoin, one thing is certain: Bitcoin is here to stay and has the potential to play a significant role in shaping the future of payments and store of value.

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