Every four years, the amount of Bitcoin rewarded to cryptocurrency miners is halved in a process aptly named the Bitcoin halving.
Halving occurs automatically in the Bitcoin mining process every 210,000 ‘blocks,’ roughly every four years. It serves to decrease coin production by halving the reward for mining new bitcoins. The most recent halving took place in 2020, and the next one is anticipated to occur around April 2024.
The reason for halving is to gradually decrease the rate of coin issuance as Bitcoin approaches its maximum supply, which is capped at 21 million coins. This built-in mechanism mirrors the scarcity of gold and effectively makes Bitcoin mining more costly as time progresses.
A look at all halvings in the history of bitcoin:
Historically, the value of Bitcoin has tended to rise shortly after each of its three previous halving events, although with diminishing returns observed with each subsequent halving. However, it’s important to acknowledge that the implications of Bitcoin’s halving may already be factored into its current price, given that the upcoming halving is widely anticipated and known within the cryptocurrency community.
Bitcoin’s Price Tends to Increase Post-HalvingThe surge in Bitcoin’s price in 2024 coincided with the approval of spot Bitcoin ETFs in the U.S., a development widely interpreted as a milestone indicating institutional acceptance of the cryptocurrency.
Additionally, inflows into Bitcoin ETFs have been surpassing the production of new bitcoins by miners even before the halving of the block reward, signalling a shifting landscape for the cryptocurrency market.
BlackRock CEO, Larry Fink, is literally on Fox Business arguing with the host about why #Bitcoin is the modern day digital gold, how it protects you from inflation and removes counter party risk associated with governments.
The narrative is changing! 🤯pic.twitter.com/OOSAs4eHjt
— The ₿itcoin Therapist (@TheBTCTherapist) March 9, 2024
Bitcoin’s halving and fixed issuance makes a strong case for investors who want a strong reliable store of value.
It serves as a stark departure from the typical approach of governments regarding fiat currencies, where central banks can increase the money supply at will, potentially leading to inflation and currency devaluation.
By systematically reducing the rate of new Bitcoin issuance over time, the halving ensures a fixed and predictable supply schedule, reinforcing Bitcoin’s scarcity and guarding against the devaluation commonly associated with fiat currencies.
Through embedding a total supply and halving event directly into the Bitcoin code, the monetary system of Bitcoin becomes immutable and resistant to alteration. This ‘hard cap’ establishes Bitcoin as a form of ‘hard money,’ akin to gold, whose supply is exceptionally challenging to modify.
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