Precisely every 210,000 blocks mined and added to the Bitcoin blockchain a halving takes place.
Bitcoin’s fourth halving is in sight
The last one happened at block 630,000 mined on May 11, 2020, and the next one will happen at block 840,000.
We are currently around the 735,000 block, so about 105,000 away from the next halving. This means we are almost halfway between the 2020 halving and the 2024 halving.
At the current rate, the fourth halving should take place in early May 2024, but it is also possible that it will take place in April of the same year. This means there are about two years to go.
Typically, a block is mined every 10 minutes on average, due in part to the fact that the Bitcoin protocol is designed to always maintain more or less this pace, even though the current block-time is 9.5 minutes. For this reason it is possible that the next halving will not take place in May, as current estimates suggest, but in April.
On all three past occasions when a halving has occurred, the price of Bitcoin has soared the following year.
The history of the halvings
The first halving took place in late November 2012, and in 2013 triggered the biggest speculative bubble ever seen in the price of Bitcoin, which jumped from $13 to $1,150 in a single year, a gain of over 8,700% in less than twelve months.
The second occurred around mid-July 2016, and in 2017 there was the second major speculative bubble with the price skyrocketing in 12 months from $900 to almost $20,000, reporting a gain of over 2,000% in just one year.
The third occurred on 11 May 2020, and by 2021 the price had risen from under $20,000 to almost $70,000, a gain of 250% and no real big speculative bubble.
This trend could continue into 2025, as the next halving will be between April and May 2024, but as can be seen from the above data it is a downward trend.
In other words, each year since the three halvings that have already taken place, the price has risen less and less, with no major speculative bubble occurring last time.
It is worth mentioning that this could be due to the Bitcoin protocol itself, and especially to its monetary policy.
The halving is Bitcoin’s only monetary policy measure, because it halves the creation of new BTC. Initially 50 new BTC were generated for each block, given away as a reward to the miner who managed to mine the block, and this went on until the first halving. After that, the reward was reduced to 25 BTC per block, then dropped to 12.5 after the second halving, and is now at 6.25 BTC.
Bitcoin’s monetary policy
This means that the first halving suddenly reduced the annual inflation of Bitcoin’s money supply from 50% to 8%, generating a truly massive supply shock.
The second reduced it from 8% to about 3.5%, so it was still a significant reduction.
Furthermore, a significant part of the Bitcoin money supply that existed at the time was effectively locked up and unusable, so real inflation was higher than theoretical.
The third halving, that of 2020, only reduced it from 3.5% to about 1.7%, so it is easy to imagine that it may have had less of an impact on the supply shock. There was a supply shock, but not to the extent that it could trigger a speculative bubble.
The next halving will bring annual inflation to 0.8%, i.e. not a particularly significant reduction from the previous 1.7%. A further attenuation of the above trend is therefore to be expected.
It is also worth mentioning that the effect of the next halving on the price of Bitcoin might not even occur in 2025, but perhaps as early as 2024, as it will have a full seven months to take effect before the end of the year.
In the meantime, the price might suffer a bit, both because the two-year wait is still a long one and because in all previous cases the two years following the bubble have not been good for Bitcoin’s price.