Bitcoin halving 2024 countdown: How miner moves could impact BTC prices

Bitcoin’s built-in scarcity mechanism, known as the “halving,” is a highly anticipated event in the cryptocurrency world. As part of Bitcoin’s 4-year cycle, the rewards miners receive for securing the network are slashed in half. With the next halving approaching on 19 April, eyes are turning toward a crucial factor: the miners themselves.

How will their response to this change impact Bitcoin’s price?

The Halving Effect: Potential for a bitcoin price surge

Bitcoin halving events are highly anticipated due to their historical correlation with dramatic price surges. After each halving, BTC prices have skyrocketed

• First Halving (2012): BTC leaped from around USD 12 pre-halving to over USD 1,200 afterward.
• Second Halving (2016): Bitcoin surged from around USD 650 to almost USD 19,000.
• Third halving (2020): Bitcoin surged from USD 9,000 to an all-time high of USD 67,549 before correcting to the USD 20,000 range where it remained for a while before its latest bull run.

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A quick glance at this chart might suggest a direct link between halvings and subsequent surges, but it’s important to remember that correlation does not equal causation. Other significant factors, such as market sentiment, regulatory changes, and broader economic conditions, play a crucial role in shaping BTC’s price trajectory.

These factors often receive heightened attention during halving seasons, influencing market behaviour. This time around, miner activity could have a noticeable say on the price trajectory, adding another layer of complexity to the dynamics of the Bitcoin market.

The market is paying attention to this and has noticed recent tech upgrades by miners ahead of the halving. Some of the miners that went shopping for new tech include Cleanspark, who agreed to buy three mining facilities in Mississippi that will cost USD 19.8 million in cash, and RIOT, who are spending USD 100 million on the latest generation of MicroBT mining rigs.

The huge spending outlays are due to the sudden reduction in block rewards, which put miners under pressure to remain profitable. To survive, miners frequently adapt their strategies by upgrading to more powerful hardware to increase the efficiency of their mining, finding more affordable energy sources, and seeking ways to diversify their revenue streams beyond solely relying on block rewards.

Effect of halving on Bitcoin price

The halving isn’t just about miners scrambling to stay afloat; it could also set off a chain reaction that impacts the fundamental value proposition of Bitcoin itself. This potential chain reaction could revolve around supply and demand dynamics, mining difficulty, and ultimately, investor confidence.

Let’s delve into how the halving can influence the price of Bitcoin through these key factors:

Supply and demand dynamics

• The sell side pressure scenario

With more powerful hardware and a higher hash rate, the potential for miners to generate more Bitcoin increases. This could lead to a greater supply of Bitcoin entering the market, which can potentially put downward pressure on prices – assuming all other factors remain equal.

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• The buy side pressure scenario

Conversely, if miners face difficulties (high electricity costs, inefficient hardware), it can reduce their output. This could lead to a slowdown in new Bitcoin creation, tightening supply and potentially having an upward effect on price.

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Mining difficulty and scarcity

Aside from directly influencing supply and demand, mining difficulty plays a crucial role in Bitcoin price dynamics. As miners upgrade their hardware and compete for block rewards, solving blocks becomes increasingly difficult. This slows the rate of new Bitcoin entering circulation. While the absolute number of Bitcoin available may not change drastically, this increased difficulty reinforces the perception of Bitcoin’s scarcity, potentially boosting investor sentiment and leading to bullish price action.

Network security and investor confidence

A robust and secure network is essential for maintaining investor confidence, and this is where increased computing power (measured in hashrates) plays a vital role. As the Bitcoin network’s hashrate rises, it becomes exponentially more difficult and costly to attack, enhancing its resilience against hacks and manipulation. This bolstered security fosters trust among investors, potentially attracting new participants to the market and ultimately driving up demand for Bitcoin.

Conclusion

Large-scale miner upgrades can affect Bitcoin’s price in complex ways. While it could lead to short-term volatility and increased selling pressure, these upgrades often represent a bullish signal for the long-term trajectory of Bitcoin. Traders should closely monitor the hash rate, news about miner activity, and overall market sentiment to make informed decisions amidst the ever-evolving landscape of Bitcoin mining

Log in to your Deriv account to trade on Bitcoin prices ahead of the halving event. Or sign up for a free demo account, which comes with virtual funds, so you can practise your trading strategies risk-free.