The bitcoin halving is a year away. This could suggest another bull run

Bitcoin is almost a year away from a key technical event – ​​which could be the catalyst for a prolonged rise in the value of the cryptocurrency.

In April or May 2024, bitcoin is expected to undergo its next “halving”, although the exact date is not yet known.

Bitcoin has risen in recent weeks ahead of the halving, as US potential Federal Reserve Lower interest rates face the prospect of sluggish growth and tighter credit conditions resulting from difficulties in the banking sector.

One bitcoin was worth around $30,000 as of Wednesday morning, according to data from CoinGecko. The world’s largest cryptocurrency is up over 80% year-to-date.

Vijay Ayyar, vice president of business development and international at Crypto Exchange Luno, said bitcoin surged above $30,000 at once. bank failures and economic uncertainty suggests bitcoin’s cyclical “bottom” is forming.

“This tends to happen around a year before the Bitcoin halving event, which is scheduled for around April 2024,” Ayyar told CNBC via email.

Bitcoin halvings occur approximately every four years, or whenever an additional 210,000 “blocks” are added to the blockchain. The event slashes rewards for bitcoin miners — volunteers who use specialized equipment to validate transactions on the network and create new tokens — by 50%. The goal is to reduce the number of new bitcoin units released to the market.

Currently, bitcoin miners receive 6.25 bitcoins for each block they successfully mine. This means that their computer had the computing power to solve the cryptographic puzzles that secure the bitcoin network and prevent it from being compromised by malicious actors.

Once the next bitcoin halving occurs, this reward will be reduced to 3,125 bitcoin.

Cryptocurrency proponents say it can help push the price up by increasing bitcoin’s scarcity.

The maximum number of bitcoins that will ever exist in circulation is capped at 21 million. This is ensured by the halving mechanism, whereby the rewards for bitcoin mining will eventually be reduced to $0.

Before the last halving, which took place on May 11, 2020, bitcoin’s price rose 19% in the previous 12 months, from $7,191.36 to $8,568.88, according to figures from CCData.

During the halving that took place on July 9, 2016, bitcoin was up 142% over the previous 12 months, from $269.14 to $651.83.

The very first halving on November 28, 2012 saw the price of bitcoin rise 384% to $12.35 from $2.55, according to figures from CCData.

“Analyzing historical Bitcoin halving patterns, it appears that investors often accumulate Bitcoin as the halving event approaches, although the exact timing and extent of returns after the halving half may differ,” Jamie Sly, an analyst at CryptoCompare, told CNBC.

“The accumulation period from the market low after the breakout to the halving date has historically been at least 500 days.”

Sly added: “That would mean that if we were to assume the market low for this cycle was November of last year (when Bitcoin hit a yearly low of $15,760), then we are only at 142 days of the current cycle. This would correlate with the next scheduled Bitcoin halving date, which is 378 days ahead.”

The price of bitcoin tends to climb even higher, in the months following the halving.

After the May 11, 2020 halving, the cryptocurrency rose 688.31% over the next 546 days, hitting a record high of $67,549.14 on November 8, 2021, according to CCData.

The previous halving, which took place on July 9, 2016, saw bitcoin skyrocket 2,824% to an all-time high of $19,065.71 in mid-December 2017.

Bitcoin has had a torrid 2022, defined by the collapses of major companies and projects, from stablecoin terraUSD to crypto exchange FTX.

Rising inflation has led to higher interest rates in the United States and other major economies, causing investors to flee bitcoin and other risky assets.

This has seen the prices of several leading digital currencies fall sharply from their all-time highs.

Despite its recent ascent to $30,000, bitcoin is still down more than 50% from the November 2021 highs.