The Bitcoin Halving explained

Written by Mel Gelderman

Posted on February 2nd, 2024

The Bitcoin Halving is an event that happens roughly every 4 years and mobilizes the whole token space. Understand in this article what exactly the halving means and how it impacts the market.

What is the Bitcoin Halving?

In order to keep the Bitcoin network safe and secure miners verify transactions that makeup the “blocks” in the blockchain. Once they add a block they receive a reward in the form of newly created bitcoins.

Every time 210,000 blocks are mined the reward miners receive is reduced by half. This is commonly known as “the halving.”

The first ever Bitcoin halving took place in 2012 cutting the rewards miners got from 50 blocks to 25 blocks. Last week’s halving reduced the reward to 3.125 halving per block.

The final halving will take place once the maximum supply of 21 million BTC is reached and is expected to happen around the year 2140. 

Why is it important?

The halving is relevant because it paces down the speed in which bitcoins enter the market so it’s a form of supply and inflation control. Bitcoins cannot be printed at will; its supply remains constant and if demand remains strong then the price will be positively affected.

If you want to know more about the ethos behind Bitcoin check out the Bitcoin White Paper by Satoshi Nakamoto

Will it affect the Bitcoin price?

Historically (keep in mind that Bitcoin is a very new concept) the halving has affected the BTC price positively. 

However this has taken place over the course of many months and is not in any way guaranteed.  

We must remember that Bitcoin is a highly volatile asset and it has been around a little over a decade so it’s difficult to predict how it will behave this time around.

What is different this time?

Bitcoin spot ETFs were approved at the beginning of the year affecting the supply and demand of the asset in unprecedented ways. Regulation is coming into place impacting how individuals and institutions relate to cryptos. We also hit an all time high a little over a month ago. 

It is hard to say how all this will affect the market overall but some things are different this time around.

What about the miners?

Miners are being led to make their businesses more efficient and cost effective, however they have always known that halvings take place every 4 years approximately, so they’ve had more than enough time to prepare and will have more than enough time to prepare for the next one.

The GPUs needed for Bitcoin mining have massive energy needs that may become costly if not managed correctly, however diversification is also an option as training large language models (Artificial Intelligence) also has high power-requirements. 

Please remember: Investing in cryptoassets is risky. Due to the volatile nature of of the cryptoasset market, investors can lose their funds when purchasing tokens. The profitability of cryptoasset investment is not guaranteed. Users should always be aware of the risks. 

Happy Halving!