Bitcoin halvings represent crucial events for the cryptocurrency industry as a whole. These reductions of the network's operation as well as their influence on price occur approximately every four years when they reduce miners' rewards in validation of the transactions and for securing the Bitcoin network.
The block reward will be further reduced in the next halving scheduled for 2028, raising many questions on how this event will affect the market. However, full effects are yet to be seen, with historical trends coupled with the current dynamics in the market, there is insight into what might happen before and after the 2028 halving.
Halvings of Bitcoin occur every 210,000 blocks, approximately every four years. The primary role of these halvings is to manage the inflation rate of Bitcoin through their slow diminishment of the creation of new Bitcoins entering the open market. Reward for mining of Bitcoin has sharply decreased since inception. In 2009, the reward was set at 50 BTC per block. The reward decreased to 25 BTC in 2012, then to 12.5 BTC in 2016, and to 6.25 BTC in 2020. The most recent halving was in 2024, which brought the block reward down to 3.125 BTC. The next halving, which is expected in 2028, will reduce the block reward to 1.5625 BTC.
Historically, Bitcoin's halvings have been followed by significant price increases. For instance, immediately after the halving of 2012, the price of Bitcoin jumped from about $12 to over $1,000 by late 2013. The 2016 halving pushed the price up from $650 to almost $20,000 by the end of 2017.
In the case of the 2020 halving, the price of Bitcoin leaped from approximately $9,000 to more than $60,000 in 2021. This jump in prices has largely been on account of Bitcoin being deflationary because its supply reduction translates to upward pressure on its price if the demand for it doesn't decline.
As the 2028 halving is not so near, some factors may affect the direction of Bitcoin price, and with each, possibly a different market dynamic.
The most notable difference compared to previous halvings is the growing institutional adoption of Bitcoin. More hedge funds, publicly traded companies, and financial institutions are now entering the Bitcoin market, bringing in substantial capital. As Bitcoin becomes increasingly recognized as a hedge against inflation and a store of value, demand for Bitcoin may increase significantly in the years leading up to 2028, potentially pushing prices higher.
The regulatory environment will also be very important in shaping the future price of Bitcoin. In the past, regulatory uncertainty has been a major source of volatility. However, there is growing optimism that clearer regulations could stabilize the market. Positive regulatory developments, such as favourable tax policies or legal recognition of Bitcoin in more countries, could attract additional institutional and retail investors.
Restrictive regulations, however, may diminish market excitement. How governments position Bitcoin and other cryptocurrencies in the future will thus be a prime determinant of whether Bitcoin will really grow.
The general economy will also shape Bitcoin's prospects for growth into the future. In times of economic uncertainty and inflation, it becomes more attractive for people to go for the so-called "Digital gold" version of Bitcoin versus fiat currencies.
If global inflationary pressures continue, it may build on the widespread acceptance of Bitcoin as a store of value, hence increasing demand. Continued exploration of Central Bank Digital Currencies might force interest in decentralized alternatives such as Bitcoin if there is an argument that they are less secure or less stable.
Predicting Bitcoin's price in 2028 is a difficult task, but some models do predict that the price of one Bitcoin will rise to somewhere between $500,000 and $1 million by then due to the increase in scarcity. Such predictions are speculative but tend to align with historical trends for post-halving price surges.
The 2028 Bitcoin halving is going to be a critical event in the cryptocurrency market. Most probably, it will affect the price of Bitcoin in a significant way. Of course, no one can predict an exact price. However, given Bitcoin's past performance, this event might well trigger further increases in price. As always, there is risk and volatility in the market, but understanding Bitcoin's cycles and trends could be insightful for those trying to navigate the road to the 2028 halving.