• The fourth Bitcoin halving set to occur around April 20

• Bitcoin rose significantly in the aftermath of past halving events

• Will the win streak continue or could things be different this time?

The Bitcoin halving, also known as the halvening, is a process that occurs approximately every four years and essentially slices mining rewards in half. At Bitcoin’s initiation in 2009, every block rewarded 50 new Bitcoins to miners, with the number expected to fall to 3.125 after the impending fourth halving.

Considering that Bitcoin’s maximum supply is capped at 21 million units, the halving’s contribution is substantial for that maximum threshold to be met gradually and in many years from now. Currently, more than 19.5 million Bitcoins have already been injected into the system and projections suggest the maximum capacity could be reached around 2140.

In other words, every halving event reduces the supply growth of new Bitcoins in half.

Besides the halving’s technical aspect, markets are focused on its impact on Bitcoin prices.  In theory, when the supply of a product is reduced but demand stays at the same levels, its price should appreciate. Especially for an asset like Bitcoin, whose maximum supply is constrained.

Furthermore, the declining reward per mined block might drive Bitcoin miners operating with tight profit margins out of the market. Such an outcome would further deteriorate the supply outlook and can apply upside pressures in prices.

What does history suggest?

In all previous occasions, the Bitcoin halvings triggered strong bull markets for the king of cryptos. The debut halving in 2012 was followed by a whopping 1,000% advance in the 12 months ensuing the event. However, this performance could be marked as an outlier due to Bitcoin being a lesser-known asset with a tiny market capitalization and extreme volatility back in that period.

In 2016 and 2020, the post-halving performance followed the same pattern, but the magnitude of the ensuing rallies was smaller. Although the price of an asset is supposed to reflect future developments, it seems that markets react inefficiently in the period surrounding halving events. Therefore, the focus for the upcoming one revolves around how much of the positivity is already baked in the price.

Why could this time be different?

Historically, every halving has been beneficial for Bitcoin prices, but there are some reasons to believe that this time could be a little different. Firstly, with the introduction of spot-Bitcoin ETFs, Bitcoin has rallied hard, potentially frontrunning the post-halving move. Appart from that, the entrance of institutional capital in the crypto space might reduce Bitcoin’s volatility as long-term holders are increasing.

Finally, the macro conditions are completely different this time compared to the three previous halvings. The era of ample liquidity and low interest rates seems to belong in the past, potentially limiting the post-halving upside. Nevertheless, crypto traders might react positively to the beginning of the Fed’s interest rate cutting campaign, which is anticipated to start this summer.

In a nutshell, the halving event has historically been a bullish development for Bitcoin's price, although it remains to be seen how much of its impact is already priced in.