The 2020 Bitcoin Halving: What You Need to Know

As another Bitcoin halving looms on the short-term horizon, traders are wondering what the network event means — and how likely we are to see explosive price action as in previous years.

What is a halving?

The halving—due to happen on 12th May 2020—marks the moment when the amount of bitcoin that gets created every ten minutes is halved. This milestone was coded into bitcoin by Satoshi at inception and happens roughly every four years.

What is the importance of the Bitcoin Halving?

For traders, the halving represents a supply shock to bitcoin. This increases bitcoin scarcity, and theoretically increases its value — just as slashing the profitability of gold miners might slow down production and push up the price of gold.

As the previous halvings passed in 2012 and 2016, bitcoin entered a period of extraordinary volatility, and bitcoin fans celebrated the event as a marker of the cryptocurrency’s maturity. In 2012, this was just a handful of enthusiasts gathered on online forums, but by 2016 Bitcoin’s surging popularity led thousands to celebrate with dedicated parties in major cities around the world.

As the 2020 halving approaches, searches for “bitcoin halving” on Google Trends have spiked to previously unseen levels, suggesting traders might be anticipating similar fireworks.

How did bitcoin perform in previous halvings?

November 28, 2012  July 9, 2016 
Price on the halving $12 $670
6 months later $121 $850
1 year later $940 $2000

As the table shows, the first ever Bitcoin Halving happened at the end of November 2012, and reduced mining rewards to 25 BTC. In the six months that followed, bitcoin pushed up 900% to reach $121, and in the year after the event, bitcoin rallied over 7,700% to reach $940.

https://lh5.googleusercontent.com/8FLaBz1lZH4WEv1I6PB5vkY0O8ZA7zd25MeozST2_2cWFs-SdWaTlb-bjXN0sWg9tdaonqh4WkEgkYHVMfLNC2Huq1sjvUkV8CePWLaP8xiuR-lmJkJDUtCcRbQWKVMn8fmJzEfm

BTC/USD 

The second Bitcoin Halving reduced block rewards to 12.5 BTC in early July 2016. In the six months afterwards, bitcoin rallied 26% to hit $850. And twelve months after the event, bitcoin had increased 200% to reach $2,000.

https://lh5.googleusercontent.com/Et-uAuxS4rBBsAcpRBhVsnIAfZXQUiQlRV3Bs407EQadNFeYQm2bb5hH1hSici2ARYTc5ApBEWXX6KJiUrNJ2yCxRr0SceNR1KqlgtFBLDb6LjDgeilNywa0R9DKwTGnANzigsiX

BTC/USD 

This historical data suggests halving events may be responsible for catalyzing bull markets.

However, the uptrends following halving events have also been punctuated with sudden drops, and traders have had to wait a while for the price of bitcoin to adjust to the reduced supply.

After both the 2012 and 2016 halving events, bitcoin traded flat for several months before eventually starting an uptrend that took the price to new highs. And, with only two previous events to draw from, the sample size is very small — so traders should exercise caution and be prepared for any possible outcome.

To stay on top of the halving price action as it plays out, traders can monitor news events and buy and sell bitcoin instantly from a single dashboard with eToro.

 

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