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What is Bitcoin Halving?

by Sandip Das from
What is Bitcoin Halving?

In this post ‘What is Bitcoin Halving?’, we talk about everything you need to know about Bitcoin halving. Two of the most significant crypto developments in 2024 are the approval of the spot Bitcoin ETF in the US and the Bitcoin halving event. Both are considered significant positive developments for not only Bitcoin but for the entire crypto industry.

Bitcoin halving influences the rate of circulation of Bitcoins in the market. Since BTC is the oldest and the most prominent cryptocurrency, any developments around BTC shape the entire crypto market. In this guide to Bitcoin halving, we talk about what is Bitcoin halving and why it matters. Also, we are going to shed light on the effects of Bitcoin halving on Bitcoin’s price.

1. Bitcoin halving explained

For any currency, inflation is a major concern, as it lowers the value of the currency. So, when Bitcoin was first introduced by Satoshi Nakamoto, one of the main concerns was how Bitcoin was going to preserve its value against inflationary pressures. But Satoshi already programmed Bitcoin in a way that, unlike the US dollar, BTC is not subject to value erosion through inflation.

Bitcoin has a supply cap of 21 million BTC. So, how does Bitcoin ensure that its circulation will not go beyond this magic number? This is where Bitcoin halving comes into the picture.

New Bitcoins are released into circulation when Bitcoin miners solve complex mathematical puzzles and complete blocks on the Bitcoin blockchain. After the successful completion of a block, the involved miner is rewarded with a certain amount of Bitcoins. This reward is called Bitcoin block reward. Bitcoin halving is an event in which this block reward is cut in half after the completion of every 210,000 blocks. Going by the Bitcoin block completion time of 10 minutes, it takes about 4 years between two halving events.

When the first Bitcoin block was completed the reward was 50 BTC, which has come down to the current reward of 6.25 per block through 3 subsequent halving events. As Bitcoin block rewards are cut in every subsequent halving event, miners have less and less incentive to mine new BTC. The block rewards fall to zero when 21 million BTC is mined, which is expected to take place in 2140.

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2. Understanding Bitcoin halving - How does Bitcoin halving work?

In every Bitcoin halving event, the block rewards of Bitcoin fall by half. This ensures that miners have less incentive to mine new Bitcoins and its new circulation eventually stops at 21 million BTC. This is designed to make Bitcoin a deflationary cryptocurrency.

Bitcoin halving affects the supply of new Bitcoins in the market, which has a major influence on its market price. The price effect of Bitcoin halving is the main reason crypto investors keenly observe market developments around Bitcoin halving.

3. When did the previous Bitcoin halving events occur?

The Bitcoin Genesis block was mined in January 2009. Since then 3 Bitcoin halving events have taken place. The first Bitcoin halving took place on 28th November 2012 after the completion of 210,000 blocks. This event saw BTC block rewards falling from 50 BTC to 25 BTC.

cryptocurrency market price chart Bitcoin block rewards will fall to 3.125 BTC in the next Bitcoin halving

The second BTC halving event occurred on 9th July 2016 after 420,000 blocks were completed. Subsequently, the Bitcoin block rewards fell to 12.5 BTC. The next BTC halving event that occurred on 11th May 2020 (after 630,000 blocks were completed) led to the block regards falling to 6.25 BTC. The next Bitcoin halving event will occur after 840,000 blocks are completed. According to the CoinGecko Bitcoin halving countdown, the next Bitcoin halving event is set to occur on 22 April 2024. Following the next halving, BTC block rewards will fall to 3.125 BTC.

4. How does Bitcoin halving affect BTC price?

The price of any asset depends on its demand and supply. Bitcoin halving is designed to slow down BTC’s supply. The basic demand-supply model suggests that when supply is restricted and demand faces rising pressure, the price is set to go up. Historically, we have observed a sustained rise in BTC prices for months following a halving event. In all the previous 3 halving events in 2012, 2016, and 2020, Bitcoin experienced a bull run after the halving events.

btc price increasing and decreasing on chart Investors are advised to take a cautious approach to the upcoming Bitcoin halving event in 2024

The crypto community expects this trend to continue after Bitcoin halving 2024. However, in investing, past performance is never a guarantee for similar price movements in the future. The crypto market is influenced by a range of factors including technological innovation, regulatory environment, government policies, interest rates, and the the state of the economy. Therefore, investors need to take a cautious approach to crypto investing no matter what past data suggests. For more crypto investing strategies, guides, exchange reviews, and BTC promo codes, head to the JohnnyBitcoin homepage.

5. What do you need to know about Bitcoin halving 2024?

The next crypto halving event, which is likely to occur in April 2024, will cut Bitcoin block rewards by 50%. So, the rewards for mining Bitcoins will fall to 3.125 BTC post this event. Going by past trends, the next Bitcoin halving is likely to give an upward push to BTC price. However, this is not guaranteed as the BTC price is affected by other factors too.

Another reason the 2024 Bitcoin halving event is significant is because of the recent BTC spot ETF approval by the US SEC. Together, both these events are likely to have a stronger positive effect on the crypto market triggering a potential bull run. However, you must invest with a cautious approach to limit your risks. Moreover, because of the high risks, you should not invest a significant portion of your capital in crypto.

6. Halving in other cryptocurrencies

Since Bitcoin is the first and the most valued crypto coin, several other coins closely follow BTC’s design. Many cryptocurrencies based on the Proof-of-Work (PoW) protocol also conduct halving of rewards. For instance, just like Bitcoin, Litecoin (LTC), and Bitcoin Cash (BCH) also undergo halving events approximately every 4 years. Similar to BTC halving, the halving events in these cryptos are designed to restrict their supply.

7. What is Bitcoin Halving? - FAQs

7.1 ☯️ Is Bitcoin halving good or bad?

Bitcoin halving is designed to restrict Bitcoin’s supply by cutting its block rewards by half every four years. This ensures Bitcoin’s value is preserved against inflation.

7.2 📅 What date is the next Bitcoin halving?

The next Bitcoin halving event is set to occur in April 2024. Following this event, Bitcoin’s block rewards will fall to 3.125 BTC from the currency 6.25 BTC.

7.3 📈 Will Bitcoin go up or down after halving?

Bitcoin halving restricts Bitcoin supply, which is likely to boost BTC’s price. Past trends suggest BTC experiences sustained price rises following a halving event. However, in investing past performance is never a guarantee for future performance of an asset. This post 'What is Bitcoin Halving?' explains the effects of BTC halving on BTC price.

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Comments (2)
GamingHomie
GamingHomie about 2 months ago
Nice guide
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