What is Bitcoin Halving? How does it affect the Bitcoin price?

Roughly every four years, the number of new bitcoins created per block halves. This scarcity measure limits supply and could push bitcoin prices higher.

What is Bitcoin Halving?

Bitcoin has a number of features embedded in its code and is programmed to allocate a maximum total supply of 21 million BTC. The two most important aspects of Bitcoin are its fixed supply and reduced block rewards, which happen about once every four years.

This cyclical decline in bitcoin issuance is known as "bitcoin halving." Back in 2012, the reward was 25 BTC per block, while in 2016, the reward was reduced to 12.5 BTC per block. As of September 2023, miners will be rewarded with 6.25 BTC for each block mined.



What does Bitcoin halving have to do with Bitcoin mining?

For every 210,000 blocks created, the number of newly issued bitcoins falls by half. This equates to about one every four years, depending on the rate at which the block is mined, with an average of about one every 10 minutes.

Blocks are added to the Bitcoin blockchain through a process called mining, which typically involves custom computers called application-specific integrated circuits (ASics) - computers designed to perform hash calculations as quickly as possible.

Mining is used to permanently add transactions to the blockchain without interference from any centralized entity. Miners incentivize cybersecurity by spending resources (mining) and are subsequently rewarded with Bitcoin.


Bitcoin halving date

To date, Bitcoin has undergone three halves: The first halving occurred in November 2012, when the block reward was reduced from 50 bitcoins each to 25 bitcoins each; The second halving dates back to July 2016, when the reward per block was reduced again, from 25 BTC per block to 12.5 BTC per block; The third halving took place in May 2020, when the block reward was reduced from 12.5 bitcoins per block to 6.25 bitcoins per block.



When is the next Bitcoin halving?

Since Bitcoin's inception, computing power has grown, meaning that block times are now less than 10 minutes on average. Because of these fluctuations, it is difficult to predict the exact date of the next halving.

The future halving is expected to occur in 2024, when the reward per mined block will be reduced from 6.25 bitcoin to 3.125 bitcoin; The fifth halving is expected to take place in 2028, with each block mined halving the reward to 1.5625 BTC.


Will halving affect Bitcoin price?

Bitcoin prices could be affected by halving:


The reward is halved to promote the healthy and sustainable development of the network. By slowing down the rate at which new bitcoins are generated, halving ensures that the supply of bitcoins remains limited.

The drop in inflation following Bitcoin's halving means less supply of new coins entering the market.

This topic is often debated among market analysts and participants. Some believe that halving will lead to a significant increase in the price of bitcoin, as lower inflation will lead to increased demand and a corresponding increase in value. Others argued that the halving had already been priced in by the market and that the event would not affect the price of the cryptocurrency.



Historically, halving is usually preceded by a bear market, followed by a bull market.

Ultimately, the price of Bitcoin is determined by a number of factors. These include market demand and sentiment, as well as regulatory dynamics. It is difficult to predict how halving will affect its value.



What does the Bitcoin White Paper have to say about 'halving'?

Interestingly, there is no direct reference to bitcoin halving in the Bitcoin white paper, as the word "halving" is not used. The paper does, however, discuss the limited supply of Bitcoin and the mechanisms that control the creation of new coins.

The white paper specifically states that the number of bitcoins created will be capped at 21 million, and that the rate at which new coins are created or mined will be halved roughly every four years. This is the mechanism underlying the halving process.

Section 6 of the Bitcoin White Paper describes the philosophy behind this idea:

"Steadily adding a constant number of new coins is akin to gold miners expending resources to increase the circulation of gold. In our case, it's CPU time and power."

Section 4 of the Bitcoin White paper explains the proof-of-work (PoW) mechanism:

"Proof of work also addresses the problem of determining representation in majority decision-making. If the majority is based on one IP address, one vote, then anyone who can assign multiple ips could subvert it. Proof-of-work is essentially one CPU, one vote. The longest chain represents the majority decision, and that chain has put the most proof-of-work effort into it."

As well as:

"To compensate for increasing hardware speeds and changes in interest in running nodes over time, the proof of work difficulty is determined by a moving average against the average number of blocks per hour. If they are generated too quickly, the difficulty increases."


Final word: Should Bitcoin holders be worried about Bitcoin halving?

Bitcoin Halving is a pre-planned event designed to reduce inflation by reducing the amount of new bitcoin created. The impact on value can vary and be influenced by many factors.


Therefore, it is important to understand halving as one of many factors that could affect the value of Bitcoin, while taking other factors into account.