Bitcoin Halving 2024: Everything We Know So Far

• Bitcoin's halving events: what and when

• How To evaluate Bitcoin's price (S2F)

• Predictions for Bitcoin's 2024 halving

What is the Bitcoin Halving?

What is Bitcoin?

Bitcoin is a form of cryptocurrency or virtual currency. Its first cryptocurrency ever created and remains the most widely used to date, with a market cap of $162.42 billion at the time of writing.

Like traditional money, Bitcoins are either a store of value or an instrument for transactions. Unlike traditional money, you cant issue or print it via central authority like a central bank. It isnt hindered by the typical laws and regulations that bind traditional money.

What is this the "halving" in Bitcoin halving?

Bitcoin halving in 2024 happens after four years when the number of Bitcoins mined per block is reduced by half. This happens every time another 210,000 blocks of Bitcoins is mined, thus providing a supply of Bitcoins for circulation at a predictable and controlled pace.

What do you mean "mined"?

Bitcoins are created or "mined" by a distributed network of Bitcoin "miners", i.e. Bitcoins are created every time a miner successfully "discovers" and "mines" a new block of Bitcoins.

Source: mining.com

What are blocks?

Picture a large block of (real, physical) gold that is then chipped into smaller pieces before being sold off. Except that instead of physical gold, Bitcoin is regarded as a form of digital gold.

Here's a summary of when the first five halving events took or will take place:

First Bitcoin halving

Date: November 28, 2012

Blocks mined: 210,000

Number of Bitcoins per block: 25

Second Bitcoin halving

Date: July 9, 2016

Blocks mined: 420,000

Number of Bitcoins per block: 12.5

Third Bitcoin halving

Date: May 24, 2020

Blocks mined: 630,000

Number of Bitcoins per block: 6.25

Fourth Bitcoin halving

Date: 2024

Blocks mined: 840,000

Number of Bitcoins per block: 3.125

Fifth Bitcoin halving

Date: 2028

Blocks mined: 1,050,000

Number of Bitcoins per block: 1.5625

How many halvings will there be?

A total of 32 halving runs are expected to take place from now till 2140 when all 21 million Bitcoins are mined, though the bulk of it or 98% of all Bitcoins will be mined by 2030.

Understanding Bitcoin's valuation

To better gauge how much Bitcoin could be worth by and after its 2024 halving exercise, it is useful to first understand how Bitcoin's price is valued.

Source: unsplash.com

Like other currencies, there are a slew of factors that determine the price of Bitcoin, including:

• The supply and demand of the currency

• The cost of creating the currency

• The supply and value of competing currencies

• Its utility, i.e. its use as a medium of exchange or store of value

• Regulations governing its sale and use

Above all, Bitcoin, like real gold, silver or platinum, is valued for its scarcity.

What is scarcity?

Scarcity is defined as something that is scarce or in short supply. While the scarcity of gold or silver goes undisputed, how does one measure the value of a scarce, digital asset like Bitcoin?

Enter the stock-to-flow model (SF or S2F).

The stock-to-flow model was created based on the belief that Bitcoin is a comparable asset to traditional commodities such as gold and silver due to its relative scarcity.

The stock-to-flow model believes that like gold and silver, Bitcoin is valuable because

• it has a maximum supply limit of 21 million coins and is costly to produce;

• the amount of Bitcoin created every year is far smaller than its existing stock; and

• its scarcity helps it retain its value over a long period and makes it a good store of value.

Source: medium.com/@100trillionUSD

The Formula

fairly simple: S2F = stock/flow (stock divided by flow)

• Stock = the total volume of the asset's existing stock, i.e. how much Bitcoin has been mined

• Flow = the asset's yearly production flow, i.e. how much Bitcoin will be mined this year

• The higher the stock-to-flow ratio, the more scarce the asset.

To illustrate this:

On March 23, 2019, Bitcoin had

• a stock of 17.5 million coins; and

• a supply of 0.7 million per year;

• so the stock-to-flow ratio was 17.5 / 0.7 = ~25

After the halving exercise in May 2020, the number of Bitcoins mined per block will be reduced by half. So based on an approximate calculation, Bitcoin will have

• a stock of 18.2 million coins (17.5 million + a year's supply of 0.7 million); and

• a supply of 0.35 million per year (0.7 million halved is 0.35 million);

• so the stock-to-flow ratio would then be 18.2 / 0.35 = ~52

Now let's go even further and add four years to that. Perhaps after the halving exercise in 2024, Bitcoin will have

• a stock of 19.6 million by 2024 [18.2 million + (4 years x 0.35)]; and

• a supply of 0.175 million per year (0.35 million halved is 0.175 million);

• so the stock-to-flow ratio would be 19.6 / 0.175 = ~112

In summary, whenever a halving occurs, the gap between the amount of Bitcoin in stock and its annual supply will keep widening, thus causing the stock-to-flow ratio to get bigger every time a halving occurs, which translates to Bitcoin becoming more and more scarce.

If you skipped the few paragraphs above thinking "I didn't click on this article for a math class!" --- just remember that the stock-to-flow model is based on the basic law of supply and demand: the less there is of something, the more it is valued.

But if you're a numbers geek and you're wondering where you can find more, do check out this handy tracker which calculates Bitcoin's daily stock-to-flow ratio.

What Will Bitcoin halving in 2024 Bring?

It is, perhaps, too soon to make predictions, though analysts theorise that with the COVID19 pandemic behind us, more governments, businesses and individuals will increasingly look to virtual currencies such as Bitcoin to prepare for future disruptions --- both as a store of value and as a way to transact with others around the world.

Others, such as the venture capitalist Tim Draper, investor Mark Yusko, and BTC China co-founder Bobby Lee, believe that Bitcoin could reach US$250,000 by 2024 and even US$500,000 by 2028.

Will their predictions come true? Let us know what your predictions are for the 2024 halving in the comments.

If you'd like to learn more about Bitcoin and other cryptocurrencies, do check out:

• How does Bitcoin work? 21 questions answered

• 6 top cryptocurrencies and how they work

• Why investors are all in for the 2020 halving