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What Is Bitcoin Halving? What Happens When Bitcoin Halves?

Bitcoin halving happens every four years or after the mining of 210,000 blocks. With each halving, the reward for Bitcoin mining is cut in half.
bitcoin halving

Bitcoin halving happens every four years and is a crucial moment in the cryptocurrency’s journey, shaping its future significantly. This event was forced to happen because Satoshi Nakamoto built into the very roots of Bitcoin which made it scarce over time.

The recent 2024 halving event, which happened on April 20, reduced Bitcoin mining reward from 6.25 to 3.125 BTC. This can help the price of BTC gradually increase over time, but it also creates many difficulties in mining.

This raises questions about whether investing in Bitcoin now is a good idea or how Bitcoin mining will be affected. For those who want to learn more about this event, we have answered some common questions about Bitcoin halving below.

Key Takeaways

  • Bitcoin halving is an event that occurs every 4 years or after 210,000 blocks are mined. After each halving, the reward for Bitcoin mining is reduced by half.
  • The most recent Bitcoin halving was on April 20, 2024. This event reduced the Bitcoin mining reward from 6.25 to 3,125 BTC.
  • Bitcoin’s price tends to increase after each halving.
  • Bitcoin mining rewards are less, and the algorithm becomes more difficult, forcing miners to find ways to upgrade mining machines as well as reduce power consumption.

What Is Bitcoin Halving?

Bitcoin halving is like a scheduled milestone in the Bitcoin system that happens roughly every four years or after every 210,000 blocks. During this time, the reward miners get for verifying transactions gets cut in half.

When Bitcoin first started, miners were getting a whopping 50 Bitcoins for every block they mined. Then, after about four years, that number gets cut in half. So, now miners are only getting 25 Bitcoins per block. And this keeps going, with the reward getting halved periodically, making it harder to mine new Bitcoins as time goes on.

How many bitcoin halvings are left?

There will be 29 Bitcoin halving events left. The final Bitcoin halving is predicted to happen in 2140. This will be the last halving event, after which the number of bitcoins issued per block will be so small that it will round down to zero. At this point, the total number of bitcoins in circulation will reach the maximum supply limit of 21 million.

These halving events are super important for Bitcoin’s money rules because they help control inflation and make Bitcoin more scarce. Plus, they tend to catch the eye of investors and can even lead to the price going up.

History of Bitcoin Halving

Since its inception on January 3, 2009, the Bitcoin halving event has occurred four times. Before the first halving, over 10.5 million BTC had been released into the market.

First Bitcoin Halving

Bitcoin’s first Halving occurred on November 28, 2012, when the block reward was reduced from 50 BTC to 25 BTC. Between the first and second Bitcoin Halvings, a total of 5.25 million BTC were mined by miners.

Following the Halving event, the price of BTC entered a period of growth, starting at $12 and reaching a peak of $1120 on November 28, 2013.

bitcoin price from 2012 to 2014
Bitcoin price from 2012 to 2014 (Source: TradingView)

Second Halving Event

Bitcoin’s second halving took place on July 9, 2016, reducing the block reward from 25 BTC to 12.5 BTC.

After the second Bitcoin halving, Bitcoin entered a bull market phase, with its price rising from $643 to $13,884 on December 17, 2017.

Following the growth period, the entire cryptocurrency market experienced a downturn as the prices of Bitcoin and many cryptocurrencies declined significantly.

bitcoin price from 2016 to 2018
Bitcoin price from 2016 to 2018 (Source: TradingView)

Third Halving Event

Bitcoin’s third halving occurred on May 11, 2020, with the block reward reduced to 6.125 BTC.

Similar to previous halvings, the price of BTC saw significant growth, reaching a peak of $58,783. During this period, Bitcoin’s market capitalization surpassed $1 trillion for the first time, a remarkable milestone after 12 years of development.

bitcoin price from 2020 to 2022
Bitcoin price from 2020 to 2022 (Source: TradingView)

Fourth Halving Event

Bitcoin’s fourth halving occurred on April 20, 2024, with the block reward reduced to 3.125 Bitcoin.

Contrary to many predictions, the price of Bitcoin remained relatively stable during the event, hovering around $63,700 per unit. BTC hasn’t experienced any significant price surges lately. On April 19th, the price dropped to a low of $59,685 before quickly rebounding back above $65,000.

Commonly, it takes a few months after the event for Bitcoin’s price to experience a significant jump because the reduced mining rewards take time to filter into the market. In the previous three halving events, it took an average of about five months for the cryptocurrency to increase in price and sustain that upward trend for around seven months.

When is the next Bitcoin halving?

The next Bitcoin halving event is expected to take place in 2028. After the 2024 Bitcoin halving event, the reward for mining Bitcoin was reduced to 3.125, making it hard to mine all 210,000 blocks, so the next event will take place after 4 years.

Will BTC Go Up after Halving?

Bitcoin has experienced three halvings before the one in 2024, and they all share a common pattern of driving up the price of Bitcoin.

This trend is easily explained by the principle of supply and demand, as demand for Bitcoin increases while the supply is reduced. As a result, the price of Bitcoin rises due to the scarcity of available coins.

While there is no guarantee of price appreciation following a halving, historical data indicates that Bitcoin prices tend to increase following certain events.

Note that price movements can be influenced by various factors, including market sentiment, investor behavior, regulatory developments, macroeconomic trends, and technological advancements.

Additionally, the impact of each halving event may vary, and it’s not uncommon to see short-term price fluctuations before and after the event. Some halving cycles have witnessed immediate price increases, while others have experienced temporary price corrections before resuming upward momentum.

The narrative surrounding each halving event can also influence market sentiment and investor behavior. Media coverage, analyst reports, and public discourse often shape perceptions of Bitcoin’s prospects, impacting buying and selling decisions.

What Happens to the Crypto Market After Bitcoin Halving?

While Bitcoin halving events primarily affect Bitcoin’s supply dynamics, they can also influence the performance of altcoins. Altcoins often exhibit price movements that are correlated with Bitcoin, with many traders and investors closely monitoring Bitcoin’s price action during halving events as a signal for potential altcoin movements.

How Will Bitcoin Halving Affect Miners?

Investors see Bitcoin halving as a good opportunity to invest, on the contrary, miners feel this event creates more difficulties.

Halving reduces the reward by half, forcing mining companies from large-scale operations to individual miners to constantly compete by “spending more money to get smaller rewards.”

After each halving event, the price of Bitcoin consistently surges. This isn’t just due to the scarcity of digital currency but also serves as a way to “compensate” miners when mining becomes more challenging. However, it also leads to smaller miners being priced out of the system due to the unbearable costs.

Bitcoin halving not only reduces rewards but also increases mining competition due to algorithmic difficulty. Some older-generation dedicated mining rigs may become inefficient in running the algorithm, necessitating the upgrade to newer equipment.

According to an analysis from Galaxy, after the 2024 halving, old mining rigs like Bitmain’s S9, Canaan’s A1066, and MicroBT’s M32 could potentially go offline. Miners must upgrade to more efficient machines like S19j Pro to stay profitable. This is why miners aren’t thrilled about every halving event.

In addition to hardware issues, electricity prices are also an issue for miners. Companies need machines consuming electricity at $0.05/kWh to maintain stable gross profit margins after halving. But in the US, mining systems consume $0.08/kWh, which may lead them to upgrade their mining rigs.

galaxy analysis of mining rigs
Estimated percent of hashrate to come offline (Source: Galaxy Digital)

 

Should You Buy Bitcoin after the Halving Event in 2024?

The general trend of Bitcoin price is to increase after halving, this has been proven through the Bitcoin price after previous halving events mentioned above. Investors see halving events as milestones within a cycle. The price of BTC typically experiences significant fluctuations after halving. This is considered a good opportunity for investors to enter the Bitcoin market.

However, following the fourth halving event on April 20th, BTC has remained relatively stable, showing little reaction. Experts assess that investors are still in a wait-and-see mode, evaluating market trends.

The Bottom Line

Bitcoin halving is an important event that occurs when the reward for mining Bitcoin is reduced by half. This reduction in reward makes Bitcoin a scarce resource that is not subject to inflation as there will only be a maximum of 21 million coins. Additionally, as time goes on, it will become increasingly difficult to create more BTC.

For investors, this is a good opportunity but for miners, this is a difficulty. Halving causes the price of Bitcoin to increase and the cost to mine BTC also increases, causing individual miners to be eliminated from the game, leaving it to large corporations.

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