On July 9, 2016, Bitcoin celebrated its second halving, an event usually awaited with great anticipation by the bitcoin community. This process, which occurs approximately every four years, halves the reward given to miners for validating transactions on the network. At the time, the block reward was reduced from 25 to 12.5 bitcoins (BTC).
Halving is an event programmed into the very code of Satoshi Nakamoto’s invention. It perfectly reflects Bitcoin’s controlled issuance strategy and is slowly leading it to reach its limit of 21 million coins.
Bitcoin halvings are produced every 210,000 blocks – roughly every four years – with the ultimate goal of slowing the rate of issuance. So far, there have already been three halvings, in 2012, 2016 and 2020.
The market usually reacts to Bitcoin halvings.
It should be noted that the Bitcoin code, which regulates the operation of the network and its cryptocurrency, have nothing to do with the market. In other words, it has no direct impact.
However, the market does value this type of technological events. This is so for several reasons: they confirm a sustained monetary policy without variants, ratify the uninterrupted and secure operation of the network and affect the supply of the cryptocurrency in circulation.
In practice, the impact on the market after the second halving was remarkable. Although some expected an instant reaction, the effect did not materialize immediately.
To speak with numbers in hand, until June of that year bitcoin was trading below USD 600 per unit. On the 15th of that month, it reached as high as USD 765, before falling back to USD 650 at the time of halving.
Contrary to what many expected, the event did not have an impact in the days that followed. The classic saying “buy the rumor, sell the news” applied; expectations had exceeded the events that ended up taking place.
But it was only temporary. After falling to USD 517 on August 1, bitcoin rebounded and began a meteoric rise that peaked on January 3, 2017, when it hit USD 1,130.
A year after the halving, bitcoin was already worth USD 2,550, and would reach as high as USD 20,000 in December of that year. This means that, after the halving, the price of bitcoin rose by 2,916% and reached a new ATH (all-time high) in a span of 17 months.
Bitcoin adoption and regulation in 2016.
Bitcoin’s second halving not only brought changes to mining rewards and the cryptoasset’s price, but also occurred in a crucial context for the cryptocurrency’s development. In 2016, Bitcoin was booming, attracting the attention of developers, enthusiasts and regulators around the world.
Debates in the community about scalability and mass adoption were ongoing, with different views on how Bitcoin should evolve.
For example, the discussion about the maximum block size was just beginning, a debate that ended in the creation of Bitcoin Cash (BCH) in 2017.
At the adoption level, 2016 was an important year, with growing interest from large companies and merchants who began accepting bitcoin as a form of payment. At the same time, regulatory debates intensified, as governments in several countries sought to establish clear guidelines for the treatment of cryptocurrencies.
Prominent developers during Bitcoin’s second halving
Several developers played a prominent role in Bitcoin in 2016. Among them, we can mention Pieter Wuille, one of the most important contributors to Bitcoin Core, key to the development of SegWit, an update activated in 2017.
On the other hand, there are also Greg Maxwell, also a Bitcoin Core developer and an advocate of SegWit’s approach to address network scalability; and Marko Falke, Bitcoin Core’s main maintainer in that year, with thousands of reviews and shares in the developer community.
Falke took the place left by Gavin Andresen, then embroiled in the discussion about Satoshi Nakamoto’s identity and Craig Wright’s role. Andresen did not resign from Bitcoin Core, but his accesses were revoked following such a scandal.
Finally, one can add to the list Wladimir van der Laan, who was until recently the main maintainer of Bitcoin Core. In 2016, he played an important role in coordinating and reviewing contributions from other developers, as well as managing the release of new versions of Bitcoin Core.
Despite sticking with these three proper names, it is worth noting that Bitcoin is an open source project, and many developers from around the world have contributed and continue to contribute to the development and continuous improvement of the network.
Expectations for halving 2024
As we look back on a historic date for the Bitcoin protocol, it is exciting to think about the next halving, which will take place in 2024. According to rough estimates, this event would materialize in April of that year. More specifically, April 26 would be the exact day on which it would occur.
On this occasion and for the next 210,000 blocks, miners are going to receive 3.125 BTC reward for each mined block, instead of 6.25 BTC as it is today.
Enthusiasts and investors are expectant, wondering how this event will impact the market and the value of bitcoin. While it is impossible to predict with certainty what will happen, history has taught us that previous halvings have been significant turning points.