4th Bitcoin Halving: What Does It Mean for Consumers and Merchants?

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20 Apr 2024

The fourth Bitcoin halving occurred on April 19th, reducing miner rewards from 6.25 BTC to 3.125 per block. This historic event has sparked interest in its impact on Bitcoin's price and the overall crypto market. Crypto merchants are also keen to see how it might affect their business. We'll explore the significance of Bitcoin halvings, their mechanics, and what stakeholders can anticipate from this latest one.
What happened during the halving?
Bitcoins are created through mining, where miners validate transactions using powerful computers, earning Bitcoin rewards for adding blocks to the blockchain. Initially 50 BTC in 2009, these rewards halve roughly every four years or every 210,000 blocks, decreasing to 3.125 BTC in the latest halving. This deflationary design ensures Bitcoin's value rises as its supply decreases, with a cap at 21 million Bitcoins. About 19.4 million have been mined, with the remaining 1.6 million expected to take another 115 years due to the halving cycle, set to continue until 2140. From the first to the fourth halving, Bitcoin's price surged from $12 in 2012 to a record $70,000 in 2024.
How will this impact the crypto ecosystem?
Halvings fundamentally affect Bitcoin's supply and demand dynamics, typically leading to increased price volatility for 12-18 months post-event, eventually stabilizing at a higher price floor. Miners and large BTC holders feel the most impact. However, recent halvings differ from past ones due to heightened media attention, including controversial ads and events like FTX's issues and the imprisonment of its founder, Sam Bankman-Fried. Additionally, Bitcoin ETF approvals fueled a months-long bull run, pushing Bitcoin's price to a record $70,000 before the latest halving. However, analysts at JPMorgan and Deutsche Bank said that the impact of this halving was mostly baked into the current bitcoin prices and there isn't likely to be a large upward movement in the price in its aftermath. Based on these reports, the immediate impacts of the halving are likely to be confined to the Bitcoin mining industry. Here, we may see consolidation as the overall hashrate decreases due to reduced profitability.
What us Bitcoin users and merchants need to know?
Given the volatility seen in past Bitcoin halvings, it's important to consider certain factors when buying, spending, or accepting Bitcoin during this period.
For investors/users/spenders
Monitor market fluctuations, but avoid trying to time the market as it's unpredictable. Adhere to sound investing practices by investing only what you can afford to lose. Determine your risk tolerance beforehand to remain calm during turbulent times. Set a predetermined exit point to take profits or limit losses, removing emotional decisions.
For those entering the post-halving market, consider using a dollar-cost averaging approach to navigate market dips and take advantage of price surges.
If you intend to sell or spend your cryptocurrency, be aware of your options in advance. This allows you to act swiftly to reduce losses, maximize gains, or make purchases when your buying power is at its peak.
For merchants that accept crypto payments
As Bitcoin's price fluctuates, crypto consumers adjust their spending patterns. During bullish markets, long-term Bitcoin holders tend to spend more of their crypto. According to internal BitPay data from the year following the last BTC halving, there was a 52% increase in processed payments. While almost all sectors saw growth, industries like luxury goods, automotive, nonprofit, precious metals, retail, and consumer electronics notably exceeded this average, with some even seeing triple-digit growth. For merchants, monitoring market conditions is crucial. This helps anticipate surges in crypto customers and provides insights on the optimal times to engage with them.
Here are some of the things you can do if Bitcoin increases after the halving;