How will Bitcoin halvings be experienced in the future?
In the next decade, the block rewards for Bitcoin will decrease significantly, posing challenges for miners and those who rely on the blockchain.
Bitcoin halvings are rare events that occur every four years, similar to the World Cup and Olympics. These events provide some certainty regarding the timing of new coins entering the market.
With 93% of Bitcoin’s supply already in circulation, it is clear that finding new coins will become increasingly difficult.
When the blockchain was first launched in 2009, miners were rewarded with a significant 50 BTC per block. This amount was reduced to 25 BTC in November 2012 and further decreased to 12.5 BTC in July 2016. The most recent halving in May 2020 resulted in rewards of only 6.25 BTC every 10 minutes, and after the latest reduction, each block generates just 3.125 BTC.
The implications of these reductions are both positive and negative for miners. On the one hand, the halving in April 2024 means that only 450 Bitcoin will be available for mining each day, compared to the 7,200 BTC available 15 years ago. However, the value of Bitcoin has skyrocketed, with 3.125 BTC worth hundreds of thousands of dollars at current market rates. In contrast, 50 BTC at the time of the first halving in 2012 was worth a mere $600.
Looking ahead, the future halvings of Bitcoin will occur every 210,000 blocks, which is roughly every four years. The fifth reduction in miner rewards is expected in 2028, resulting in a reward of 1.5625 BTC. This reduction will occur when the Bitcoin network reaches a block height of 1,050,000.
Moving forward to the 2030s, Cathie Wood predicts that a single Bitcoin will be worth $1.5 million, with a bearish scenario of $258,000. The 2032 halving will be significant because it will be the first time that block rewards permanently drop below one whole coin, to 0.78125 BTC. This will highlight the increasing importance of Satoshis, which are equivalent to one 100-millionth of a Bitcoin, for miners.
The rewards for miners will continue to diminish over time. By 2036, miners will receive a mere 0.390625 BTC, resulting in the release of only 56.25 BTC every 24 hours. Halvings will continue to occur every four years, aligning with the Summer Olympics, in 2040, 2044, 2048, and beyond. Each subsequent event will further decrease the reward for miners. By 2052, miners will only receive 0.0244140625 BTC for adding a block to the blockchain, which would be worth just $1,660 in fiat terms. The mining process will end in 2140 when the supply of Bitcoin is fully exhausted.
Being a Bitcoin miner is an expensive endeavor that requires significant electricity and computing power. As the block rewards decrease, miners need to keep their costs low to remain financially viable. Transaction fees paid by users of the blockchain will become an increasingly important source of income for miners. While everyday payments are unlikely to become prohibitively expensive, the cost of large transfers may need to increase to support miners.
Galaxy predicts that mergers and acquisitions will become more common in the mining industry to reduce energy costs, increase efficiency, raise capital, and achieve growth. Smaller operators have already started to join forces. However, this consolidation may come at the expense of decentralization.
The 2024 halving will be unique in many ways. It coincides with the launch of Bitcoin ETFs in the U.S., which will attract new investor interest. Additionally, this year marks the first time that Bitcoin’s price has reached a new record high before the block rewards have been reduced. As the market evolves, miners will need to adapt accordingly.
