The upcoming Bitcoin halving is different from others before it. Here's what investors need to know.

Just a few years ago, the Bitcoin halving was something celebrated by only the earliest cryptocurrency lovers who saw it as a core feature of a revolutionary, anti-establishment deflationary asset. Now, bitcoin has been embraced by the biggest institutions on Wall Street and continues to draw curious retail investors in each cycle. From the gleeful to the perplexed to the unimpressed, crypto market watchers know this ‘halving’ is coming and that it must mean something good for bitcoin.

This is a technical event that takes place on the Bitcoin network roughly every four years, cutting the supply of the cryptocurrency in half to create a scarcity effect that makes it like ‘digital gold.’ Historically, it sets the stage for a new cycle and bull run – but this one’s a little different.

Bitcoin (BTC), entering its fourth halving period next week.

After the 2012, 2016 and 2020 halvings, the bitcoin price ran up about 93x, 30x and 8x, respectively, from its halving day price to its cycle top. Some even caution that the days of the halving having such a big impact on the bitcoin price are likely already behind us.

However, experts believe that in the current cycle, with reduced supply and increased ETF demand, the impact of the halving could be even more significant. The bitcoin bull cycle, which started earlier than usual due to the approval of spot ETFs, might be shorter and more explosive, culminating in a peak in late 2024 or early 2025.

The halving occurs when incentives for bitcoin miners are cut in half, as dictated by the code of the Bitcoin blockchain. It’s scheduled to take place every 210,000 blocks, or roughly four years. Miners run the machines that record new blocks of bitcoin transactions and add them to the blockchain.

Miners have two incentives to mine: transaction fees paid voluntarily by senders and mining rewards in the form of newly created bitcoins. Sometime between April 18 and April 21, the mining rewards will shrink, leading to a reduction in the supply of bitcoin. This reduction helps maintain bitcoin’s value as a digital gold asset.

The halving isn’t like an on-off switch that gets flipped at a specific time, and there might not be immediate market action surrounding the event. However, in the months that follow, the reduction in new bitcoins being sold by miners can have a significant impact on the market.

Miners are the most regular sellers of bitcoins, and when their supply is cut in half, there is significantly less bitcoin being sold. This reduction in supply combined with the increasing demand for bitcoin due to the advent of ETFs could have a positive effect on prices.

Past halvings have seen diminishing returns, but the trend could reverse this year due to increased demand for bitcoin. The planned supply shock might be overshadowed by the new demand shock driven by the growing interest in cryptocurrency and the introduction of bitcoin ETFs.

The once-significant influence of bitcoin halving on prices has diminished, as the new issuance of bitcoin gets smaller relative to the total amount available for sale. Bitcoin demand growth seems to be the key driver for higher prices after the halving.