Highlights
- Bitcoin halving is something which is highly anticipated by the BTC community.
- During halving, the reward for miners is halved, which in turn halves the supply of bitcoins.
- Halving never guarantees a price hike.
Bitcoin has been a pioneer in cryptocurrency. Since its inception, it has experienced various ups and downs, including a significant price drop at one point. It has withstood the test of time and has emerged as one of the strongest cryptocurrencies in the world.
There are numerous interesting facts about BTC. One of the most interesting aspects is the halving of Bitcoin. Apart from being interesting, it is also one of the most significant events in the BTC industry. However, this is not something new; it has a long history. What is most important to know is that every halving has resulted in a significant surge in the BTC price. So, it becomes essential to know the dates of this event.
Understanding Halving
Mining is an essential aspect of BTC. Interestingly, bitcoin halving concerns itself with this issue of mining. To be precise, during a bitcoin halving or halvening, the mining reward is halved. That means, during a halving, the rewards of the miners will be cut down by 50%. This, in turn, cuts down the supply rate of bitcoins to its half. Roughly every four years, as the mark of 210000 blocks is reached, a halving takes place. This will continue until the maximum circulation of 21 million bitcoins is achieved.
What makes this event even more significant is that it can result in a surge in BTC price, if the demand is high. This surge in price happens as halving limits the circulation of BTCs. This has been the case for most of the previous halvings. It is essential to remember that conditions during a halving, as well as the demand, vary significantly. Therefore, this surge in price should not be taken for granted.
Bitcoin Halving: The Way It Works
Halving has already been established to take place roughly every four years. It is also a known fact that during the event, BTC mining gets halved. In 2009, miners received 50 BTC to confirm a block. Over the years, this process has become more competitive and difficult. At the same time, the rewards have also decreased significantly.
Considering that mining one block can take up to 10 minutes, the halving occurs at intervals of roughly four years. The number of people mining BTC has increased steadily. Thus, it becomes harder to mine BTC with every passing year. As a result of this, predictions suggest that halving generally increases the BTC price.
Why Does Halving Occur?
The design of the BTC software is responsible for the halving. The developer, Satoshi Nakamoto, has yet to provide an explanation regarding the cause of the halving. But that has not prevented people and experts from coming up with their assumptions. According to one assumption, the original design of the system was aimed at distributing the coins more swiftly. This was propelled by the desire to incentivize people to join and mine new blocks. Therefore, this assumption suggests that the halving is done as the value of each coin was expected to rise with the expansion of the network.
Another such assumption suggests that halving is aimed at including deflation in the coins. This would help in pre-determining the number of new coins issued as a reward per block. Interestingly, much unlike fiat money, central banks can not overprint Bitcoin. Though overprinting money reduces its value, Bitcoin has a fixed total supply. This means that new bitcoins are created at a set rate. Thus, it prevents the value from dropping.
Halving has its own share of criticisms. One such criticism of Bitcoin’s design is that it encourages saving, not spending. This is because people hope their coins will increase in value. This includes the halving events and the finite supply of 21 million coins. It may have caused boom and bust cycles. Users hoard coins and then cash out at key times.
Impact on BTC Price
Halving is very important for BTC enthusiasts. It is one of the most highly anticipated events in the BTC calendar. Bitcoin halving dates are highly anticipated because of their impact on BTC prices. In fact, after each halving, BTC prices have skyrocketed, as they have with the three halvings so far.
For instance, before the first halving in 2012, BTC was about $12. On the other hand, after the halving, it peaked at over $1,200. Similarly, the second halving was notable for the price change because it coincided with the “Crypto Winter.” Before the second halving, BTC was around $650. After the halving, BTC almost reached $19,000. Then, during the Crypto Winter, BTC fell to under $4,000. Similarly, before the third halving in 2020, Bitcoin’s price was around $9,000. As expected, following the halving, BTC hit a record high of $67,549. It dropped to around $20,000 and stayed there for a while.
After the fourth halving, BTC’s price crashed from an all-time high around the halving date. Therefore, analysing Bitcoin halving dates is useful. However, it does not tell the whole story. For example, the third halving was on May 11, 2020. BTC’s price went from $9,000 to nearly $70,000 a year later. It seems easy to think these swings are just due to the halvings.
These price changes result from many factors, with halving being just one. In 2021, the entire cryptocurrency market surged, influencing most cryptocurrency prices. Still, BTC halvings do affect its price. These events are highly anticipated and show a clear pattern. Whether this pattern continues with future halvings remains to be seen.
Does Halving Guarantee Price Hike?
Indeed, Bitcoin halving often leads to positive price changes. It does not guarantee an instant or automatic price increase. Each halving reduces the amount of new Bitcoin entering circulation. Changes in supply can affect the size and pattern of Bitcoin’s price swings before and after each halving.
The impact of supply changes on Bitcoin’s price is expected to decrease over time. This means we may see smaller price changes from the low to the high points after each halving. As the supply changes become less influential, the price peaks will also likely be smaller. Many factors, such as market sentiment, demand for Bitcoin, investor behavior, and external events, affect how the market reacts to halving events. While past trends suggest halving contributes to long-term price increases, short-term price changes are unpredictable and influenced by market dynamics.
Significance of Halving
Interestingly, halving is of huge importance to numerous people around the world. To understand their impact, there is a need to look at each group affected by them.
Investors
When they hear about Bitcoin halving, most people think of BTC price changes. These changes most impact investors. Historically, they are excited about halvings because they often boost BTC prices. Thus, many investors buy Bitcoin before a halving, hoping to profit from the expected price increase. This is not guaranteed. The price increase from a halving is one goal, but other factors also influence BTC prices. Thus, predicting exact price changes after a halving is difficult and risky.
Miners
Bitcoin halving affects miners in both positive and negative ways. Each halving makes BTC scarcer, potentially increasing demand and profits. Mining rewards are cut in half, making mining more difficult. This is especially hard for solo miners who compete with large mining farms. Rising electricity costs and increased mining difficulty push some miners to other cryptocurrencies, reducing Bitcoin network security. Mining pools help solo miners but don’t solve the core issues.
The Crypto Community
For those not directly involved in BTC investment or mining but active in the crypto community, Bitcoin halving still matters. Halvings often influence the whole crypto market, not just BTC. News about upcoming halvings attracts attention and new investors. The speculative nature of the crypto market also means traders watch halvings closely, investing in other cryptocurrencies accordingly. The crypto market seems to follow a roughly four-year cycle between bull runs, possibly influenced by Bitcoin halvings. Whether this is a coincidence or a direct result is unclear.
The Next Halving
The miners are always searching for the upcoming BTC halving. The next Bitcoin halving is estimated for April 19, 2028. Bitcoin miners now get 3.125 new Bitcoins for each block they mine. This date might change as it is based on current block estimates.
Mining 21 Million Bitcoin: Dream Or Reality?
Bitcoin halving will likely repeat every four years until the block reward becomes zero. Predicting future prices or rewards is difficult. With each halving, Bitcoin numbers and rewards are cut in half. Based on the current cycle, all Bitcoin will be mined by around 2140.
Also read: Why Halving Calculators Differ on The Imprecise Science of Bitcoin Halving Countdowns
