Bitcoin experienced its quadrennial halving event one year ago, resulting in a significant reduction of block rewards for miners. Historically, such halving events have led to substantial increases in Bitcoin’s price one year later, attributed to the decreased supply of new coins entering the market. While the cryptocurrency did reach a new peak recently, the percentage growth following this halving has been considerably less impressive compared to previous cycles.
According to data analysis firm Kaiko, although Bitcoin has indeed climbed to an all-time high since the halving in April 2024, the percentage increase has not matched the remarkable gains seen in previous cycles. The firm noted that the current performance of Bitcoin represents the “weakest post-halving performance on record” in terms of percentage growth.
As of Friday, Bitcoin was trading around $95,000, reflecting a 49% increase since the halving event. In contrast, previous halving periods have seen percentage gains reaching into the thousands. Kaiko’s Senior Analyst, Dessislava Aubert, highlighted that the current macroeconomic environment, characterized by high interest rates and uncertainty, is a significant factor affecting Bitcoin’s performance.
Historically, Bitcoin has thrived during periods of low interest rates, similar to other risk assets like equities. However, recent investor apprehensions regarding economic policies and geopolitical tensions have contributed to a decline in these markets. For instance, Bitcoin surged to nearly $109,000 on January 20, coinciding with the inauguration of U.S. President Donald Trump, driven by optimism surrounding the new administration’s potential impact on the cryptocurrency space.
The halving event occurs every four years, reducing the rewards miners receive for validating transactions. This reduction typically leads to expectations of price increases due to the limited supply of new coins. For context, prior to Bitcoin’s first halving in 2012, it traded at $12.35, only to rise to $964 within a year, marking an astonishing nearly 8,000% increase. During the second halving in July 2016, Bitcoin started at $663 and reached $2,500 by 2017, a 277% rise. Following the third halving in May 2020, Bitcoin’s value soared from $8,500 to over $69,000 the following year, representing a 762% increase.
The most recent halving reduced miners’ rewards from 6.25 BTC to 3.125 BTC per processed block. Nevertheless, Bitcoin’s current price is only marginally higher than it was a year ago, which has puzzled analysts who anticipated a much stronger market response following the halving and the approval of spot Bitcoin ETFs earlier this year. Despite a notable dollar increase, the overall scale of Bitcoin’s price movement has left many industry experts feeling underwhelmed.
Disappointment isn’t limited to retail investors; the mining sector is also facing challenges. The lower Bitcoin price has forced many mining operations to liquidate their holdings more frequently to cover operational expenses. Curtis Harris, Compass Mining’s senior director of growth, pointed out that the increased difficulty of mining, coupled with stiff competition for smaller rewards, is putting additional strain on businesses in the sector. He remarked that the April 2024 halving has not resulted in the explosive price growth that many miners had anticipated, further complicating the economic landscape.
While Trump’s election and subsequent policies initially contributed to Bitcoin’s market peak, the asset has since experienced volatility, only partially recovering amidst concerns over his unpredictable trade and economic strategies. These factors have inflated borrowing costs and prompted miners to adopt a more cautious approach, which in turn hampers investment in new mining ventures.
However, Compass Mining Chief Mining Officer Shanon Squires noted that miners could have anticipated a less vigorous rally than in past post-halving periods. He emphasized that those who effectively manage operational costs and run efficient mining operations can still maintain profitability. “Anyone who built their mining farm expecting Bitcoin to reach $1 million today wasn’t paying attention,” Squires concluded.
