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Bitcoin halving is a term that describes the reduction of the Bitcoin mining rewards to 50%. Historically, Bitcoin halving is associated with a surge in the price of Bitcoin as well as the altcoins by extension. So, being aware of Bitcoin halving and its impact is not just important for cryptocurrency miners but also for investors and crypto enthusiasts across the board.
This article will deeply dive into the process called Bitcoin halving which happens almost every four years or on every 210,000 blocks added to the Bitcoin blockchain. Let’s understand it on a deeper level concerning the market trends observed at halvings to see how they impact pricing.
What Is Bitcoin Halving
Bitcoin is a cryptocurrency token that works on the blockchain technology. Blockchain technology, or the distributed ledger system is what prevents users from double spending and altering the transactions. Here, the transactions are added to a block and are added to the chain that has the historical data of each transaction that happened before.
The nodes that add a new block to the main chain of Bitcoin are called miners. The miners receive a fixed amount of Bitcoin every time they add a new block to the main chain. In the beginning stages, the mining rewards were 50 BTC per block.
But Satoshi Nakamoto, the creator(s), has written an algorithm for the smart contract that facilitates the mining reward that cuts the rewards in half, for every 210,000 blocks added.
Bitcoin Halving And Pricing
The first Bitcoin halving happened on 28th November 2012 at block number 210,000, which reduced the bitcoin mining rewards from 50 BTC to 25 BTC. During the halving, Bitcoin was valued at $12 but rose to $1000 just after the halving. This is when the world first became aware of what halving is and how it can impact the market.
This trend of Bitcoin pricing rising after halving continued to be consistent throughout, let’s see how:
| Halving | Date | Mining Rewards | Price Change |
| 1 | November 28, 2012 | 25 BTC | ~$12 to $1,075 |
| 2 | July 9, 2016 | 12.5 BTC | ~$650 to $2,560 |
| 3 | May 11, 2020 | 6.25 BTC | ~8,727 to $55,847 |
| 4 | April 19, 2024 | 3.125 | ~$61,803 to $73,780.07 |
After the last Bitcoin halving happened in April 2024, Bitcoin broke its all-time high and rose to $73,780.07 indicating that the trend will continue in the coming halving as well. But what is the halving actually for? And how does it impact the market?
Why Bitcoin Halving Matters
We have already seen what Bitcoin halving is and how it has historically impacted the bitcoin price. But if you are wondering what the purpose of Bitcoin is, let’s get into finding its importance and why it matters.
Bitcoin halving is a clever way to reduce the addition of newly generated tokens into the supply, which can possibly reduce inflation and increase demand. This is one of the most important features that make Bitcoin a sustainable cryptocurrency asset. Let’s see the impacts of Bitcoin:
1. Reduce Inflation
Inflation is used to describe the reduction of the value of currency over time. It is calculated in terms of US dollars as the amount of money it would be required to buy a basket of goods from the previous years. One of the major purposes of Bitcoin halving is to protect the cryptocurrency from inflation.
2. Demand
Naturally, when the supply of new Bitcoins drops by half, it creates a sense of scarcity and in turn, increases the demand. This is why the price of Bitcoin usually rises to its all-time high after halving. This is beneficial for both the investors and the spectators.
3. Investing
Bitcoin is a cryptocurrency that was created for regular transactions. However, it has become a popular investment, for its potential gains. Investors have heavily benefited from Bitcoin halving due to the increased value of the asset.
4. Miners
Bitcoin miners are a group of people that are impacted directly by Bitcoin halving. During halving, their reward for mining a Bitcoin block reduces to half, additionally, it would require them to use more computational power and electricity to carry out the process.
Even though there is an argument that the price surges after Bitcoin halving, may even out the reduction in the amount of tokens received, in reality, a Bitcoin halving does not double the price. So, Bitcoin halving may affect miners negatively.
Next Bitcoin Halving
As we have mentioned at the beginning of this article, a Bitcoin halving happens at every 210,000 blocks added to the Bitcoin blockchain. On average, a new block is added to the blockchain every 10 minutes, which means that it would take about four years for a halving.
The last halving occurred in April 2024, so the next Bitcoin halving is expected to happen on 26 March 2028. In the next halving, the mining rewards will reduce from 3.125 BTC to 1.624 BTC, further reducing the amount of new Bitcoin coming into circulation.
How to Prepare for the Next Bitcoin Halving?
If you are interested in capitalizing on the next Bitcoin halving, you need to make some effort to know what to do and what to expect. Here are some tips for preparing for the next Bitcoin halving:
- DYOR (Do your own research): Before making any investment decisions, you should do your research and be aware of what Bitcoin halving is in detail. You should also familiarize yourself with the previous market trends and historic price surges during the halving.
- Diversify your portfolio: Bitcoin halving creates a snowball effect and it can also affect the price of several altcoins in the market. So, do not just limit your focus on Bitcoin, but also pay attention to the altcoins. In some cases, they can bring the most profit.
- Join community pages: One of the best ways to keep track of market sentiments is to join community pages and forums. You may find them on social media sites such as Reddit, Discord, Twitter, and more.
- Plan contingencies: Be aware that the cryptocurrency market can fluctuate at any time. So, be sure to be prepared for all types of scenarios. It is better to face the next Bitcoin halving with plans A, B, C, D, and more if possible.
Conclusion
Bitcoin halving is a process in which the Bitcoin mining rewards are reduced to 50%. This happens every 210,000 blocks mined, which happens every four years. Historically, the price of Bitcoin rises after every Bitcoin halving. The last halving happened in April 2024, the value hit its all-time high.
Bitcoin halving is put in place to control inflation and drive up demand, while it can be beneficial for investors, spectators, and the whole market, it may affect, miners negatively. The next halving is expected to happen in March 2028.
