Published Jun, 12 2023

What is Bitcoin Halving & How Does It Work?

Bitcoin halving is the term used when block rewards for miners get reduced by half. This happens every four years and results in a 50% reduction in the supply of new Bitcoin. This process was developed to protect the Bitcoin protocol from inflation by maintaining a limited supply. Let’s talk about Bitcoin halving, why it […]
Bitcoin Ordinals

Bitcoin halving is the term used when block rewards for miners get reduced by half. This happens every four years and results in a 50% reduction in the supply of new Bitcoin. This process was developed to protect the Bitcoin protocol from inflation by maintaining a limited supply.

Let’s talk about Bitcoin halving, why it happens, all of its benefits, and the effect it has on the value of Bitcoin.

What is Bitcoin Halving?

Every four years, the number of new Bitcoins entering circulation through crypto mining is cut in half. Sometimes called “the halvening,” this process helps maintain Bitcoin’s store of value. While it reduces the potential rewards for miners, it’s a protective measure against the inflation we commonly see in fiat currencies around the world.

When Bitcoin was new, the reward for mining one block was 50 Bitcoin. Now the rewards for mining a block have been significantly reduced to 6.25 Bitcoin. Other cryptocurrencies use these deflationary practices as well, including burning coins.

How Does Bitcoin Halving Work?

Halving is a part of the Bitcoin blockchain protocol and is essential to the way Bitcoin works. In the beginning, rewards were high and mining Bitcoin was appealing. It incentivized miners to adopt early.

By decreasing the rewards for mining the coin, more miners are competing for the same rewards. This adds hashing power to the network and protects the market from being flooded with Bitcoin.

Having a basic understanding of the process of crypto mining and its economics can help you understand halving better.

Bitcoin halving happens every four years, with the first starting in 2012. The block reward was reduced from the original 50 to 25. In 2016, it reduced to 12.5, in 2020 it reduced to 6.25, and in 2024 it will reduce again to 3.125.

Bitcoin Halving - The Good and the Bad

There are some good things about Bitcoin halving. Many people believe it’s the main reason Bitcoin still has value. There will only ever be 21 million Bitcoin in circulation, and it was designed this way from the beginning.

In addition, because Bitcoin is hard to create and has a limited supply, it is sometimes compared to valuable and precious metals like gold. Gold is scarce and must also be mined. However, it is not correlated to the price of gold.

The Effect of Halving on Bitcoin’s Price

In the 18 months following a halving, Bitcoin’s value tends to increase. After the first 2012 halving, Bitcoin hit $1000, which was the highest it had ever been to that date. It jumped from the $50 it was at the beginning of the year, before halving.

Once again, after the second halving, Bitcoin’s value jumped from less than $1000 to a record high of $20,000. After the 2020 halving, the price increased to over $60,000, but it has come down again since.

Following price increases, retreats often happen. This can lead to drawdowns of 90%. Then, as Bitcoin appreciates again over time, leading up to the next halving, the cycle repeats.

Markets fluctuate for all kinds of reasons, so it’s difficult to predict price increases or pinpoint the cause. Crypto can also correlate to other financial markets at times. This is a simplified explanation, but it gives you an idea of how the halving process affects the price of Bitcoin.

FAQ

Is Bitcoin halved?

The schedule for halving Bitcoin is every four years and the process was designed by the creators of Bitcoin. It is set to halve again in 2024.

What will happen after Bitcoin halving in 2024?

Another Bitcoin halving is coming up next year, at which point the reward for mining a block will be 3.125 BTC.

Does Bitcoin halving increase the price?

Generally, yes, the price increases temporarily after a halving occurrence. However, there are a lot of other factors that affect the price of Bitcoin, and the price also generally tends to fall again after reaching an all-time high.

We only have three halving instances so far to notice a trend, so it can be tough to predict whether this will happen every time or not.

How often is Bitcoin halved?

The halving process happens every four years. The first time it happened was in 2012 and the last time it happened was in 2020. The next time it happens will be 2024 and it will continue to happen according to this schedule until the Bitcoin mining supply is exhausted.

Final Thoughts

Every time a miner completes a block, they receive a reward. However, every four years, this reward is cut in half. This is a critical process in the Bitcoin network and it’s what helps Bitcoin maintain its store of value. However, as you can see now, it sometimes also affects the price.

If you’re interested in filling your wallet with some of what people think is the most unique cryptocurrency, head to the closest Bitcoin Depot ATM and conduct fast, easy, and secure transactions today!