If you are a crypto follower, let alone a crypto trader, you might see some daily reminders on social media, especially on X (formerly Twitter), on various crypto influencers’ timelines. The reminder they are giving is on the upcoming Bitcoin halving event. Many crypto influencers, traders, and analysts are counting down the days before the next halving events take place. Up till now, if you don’t know what Bitcoin Halving is and why it is such a big deal in the world of cryptocurrency, then we have got you covered.
What is Bitcoin Halving?
Bitcoin Halving is a process in which the total minting supply of Bitcoin sees a reduction of 50% after 4 years. Ever since Bitcoin was first introduced to the world in the latter part of the 2000s, more than 19 million Bitcoins have been mined and put into circulation. Now, the most interesting part is that according to the Bitcoin white paper published by the famous yet unseen Satoshi Nakamoto, only 21 million Bitcoins will ever be mined. After that, no new Bitcoin will be mined. So, in a world of 8 Billion people and counting, the existence of only 21 million Bitcoin tokens would certainly make it a very desirable cryptocurrency token to own, and those who will eventually end up with 1 or more Bitcoin would certainly consider themselves to be part of an elite group one day.
But if 19 million of the 21 million available Bitcoin tokens have been mined, does it mean that the remaining tokens will be mined in just a few years? The answer will certainly surprise you as the complete minting of Bitcoin tokens to take place would require 128 more years before, finally, in 2041, the final supply of Bitcoin tokens would be mined. Now how is that possible, and what exactly does the Bitcoin White paper contains that will help explain to the people how Bitcoin halving work?
How does Bitcoin halving work?
The person behind the famous Bitcoin White Paper, Satoshi Nakamoto, introduced the concept of halving, keeping in mind a few things. If Bitcoin becomes a desirable commodity in the future, then there should be a method to preserve its exclusivity. Therefore, he decided that only 21 million Bitcoin tokens would ever exist. And to make sure that not all of the supply gets mined and put into circulation at once, the available supply of Bitcoin should be reduced by exactly 50%.
In a Blockchain, there is a Block which is a data structure that contains a group of transactions. It’s like a page in a ledger that is placed for recording multiple transactions. Blocks are created sequentially with each new Block containing the record of the most recent transaction that has taken place on the Bitcoin Network.
Once 210,000 Blocks of Bitcoin are mined, the block reward is cut in half. The time it takes to mine a total of 210,000 is approximately four years. 3 Bitcoin halving events have already taken place in the past, so that means that 630,000 are already mined. In fact, at the time of writing this article, 810,812 blocks had been mined. When this figure reaches 840,000 in 2024, the next halving event will take place.
When Bitcoin was first released back in 2009, the reward to Bitcoin miners who supported the Bitcoin Blockchain and verified the status of the online ledger was 50 BTC. In today’s world, many crypto traders dream of holding just 1 BTC. Back in the day, perhaps no one knew how much of a financial reward it was to hold 50 BTC. Once the first 210,000 Blocks were mined, the Bitcoin’s block reward was cut in half, which was 25 BTC. The next halving event saw the block reward reduced from 25 BTC to 12.5 BTC. And after the last halving event, the current block reward is 6.25 BTC. The next halving event will see the reward reduced to 3.125 BTC.
What impact does Halving have on Bitcoin’s price?
Historically, the market is very hyped near the Bitcoin halving event, and people have a significant rise in the Bitcoin value after every halving event. So, in theory, if you own a Bitcoin token before the halving event, you can certainly expect to see its value increase after the halving takes place. However, we must emphasize that it would be very premature to assume that the next halving event would certainly give you exponential gains for holding Bitcoin in your crypto portfolio.
The price of Bitcoin is determined by many other factors like the current demand, market conditions, current global and economic environment, etc. But as of now, the last 3 halving events have shown us that after every halving event, the market has shown Bullish sentiments, and we have seen a desirable increase in Bitcoin’s price value. Below is a little representation of how halving impacts Bitcoin’s price value.
| Halving Date | Bitcoin price on halving date | Bitcoin price after halving (150 days later) |
| 28 November 2012 | $12.35 | $127 |
| 9 July 2016 | $650.63 | $758.8 |
| 11 May 2020 | $8821.42 | $10,943 |
WE EMPHASIZE AGAIN THAT HOLDING BITCOIN BEFORE HALVING DOESN’T GUARANTEE EXPONENTIAL RETURNS.
The need for Bitcoin Halving?
The fundamental reason behind Bitcoin’s Halving is that to maintain Bitcoin’s high value, its rarity should be maintained. The way this goal can be achieved is by making sure there aren’t too many Bitcoin tokens available for everyone to buy. It’s no wonder Bitcoin is termed the “Digital Gold” of the crypto world because people want it to remain valuable like gold.
The other reason Bitcoin halving exists is that the miners who spent time, effort, and a lot of investment behind the infrastructure needed for Bitcoin mining will get half the reward for mining the same number of blocks compared to the return before the halving event, they will double their efforts to gain similar returns. This also helps control the Bitcoin price inflation in terms of controlling the supply growth.
What happens when the Bitcoin supply is Depleted?
Bitcoin miners have spent considerable resources in mining Bitcoin. While in theory, the halving event doesn’t give favourable outcomes to Bitcoin miners, the thing that motivates them to continue their work is collecting transaction fees after the addition of a new Bitcoin block in the network. The current fee miners collect when someone wants to send a Bitcoin is not high, but the growing adoption of Bitcoin and cryptocurrency, in general, will certainly give miners opportunities to collect a larger transaction fee, and they will continue their work in developing the Bitcoin ecosystem.
Our Thoughts
Bitcoin halving event helps the network control the circulation of coins. This, in turn, becomes instrumental for the Bitcoin value to remain high in the crypto market. The whole of the crypto community is either anxiously or excitedly waiting for the next Bitcoin Halving event, and many are already making bold predictions about the new highs Bitcoin will reach after that event. Whether or not those predictions prove to be true? Only time will tell.
