Bitcoin halving cuts the reward for mining a block by half. This key event occurs about every four years and is crucial for Bitcoin’s value and price trends.
Initially, miners earned 50 BTC per block. Satoshi Nakamoto capped Bitcoin at 21 million and programmed rewards to halve every 210,000 blocks. This controls inflation.
But why?
The article explores halving’s essence. Halving dramatically reduces new bitcoin supply. It’s a unique event in asset history. Basic supply and demand principles suggest a significant price impact.
You’ll learn how halving works and its protocol role. The link between halving, price trends, and past cycles becomes clear. We explain why its impact spreads over time. Bitcoin’s liquidity doesn’t immediately drop for various reasons.
Halving in Numbers
For the first four years of Bitcoin’s existence, mining a new block rewarded miners with 50 BTC. Let’s do some simple calculations based on Bitcoin principles and examine the supply chart. As mentioned, the halving cycle repeats every 210,000 blocks, roughly every 3.9954 years.
The figures vividly showcase one of Bitcoin’s most brilliant features. If you’re familiar with these, skip directly to «The Sharp Supply Shortage» section. Now is the best time to check the calculations yourself and see if your figures align with those presented below.
The First and Second Halving Cycles
Bitcoin was launched on January 9, 2009, with an initial block reward of 50 BTC. The first halving in November 2012 reduced the block reward to 25 BTC. By the end of the second halving cycle, a total of 15.75 million bitcoins had been mined.
The Third and Fourth Halving Cycles
The figures halved again in July 2016, and over the next four years, the block reward was 12.5 BTC. By the end of the third halving cycle, a total of 18.375 million bitcoins had been created.
The last halving occurred on May 11, 2020, setting the block reward at 6.25 BTC for the next four years. By the end of the fourth halving cycle, a total of 19.6875 million bitcoins will have been created.
The Sharp Supply Shortage
These numbers show an impending shortage. By 2024, 93.75% of all bitcoins will have been mined, leaving just 1.3125 million to be mined over 116 years!
Examining price trends and cycles pre- and post-halving reveals a consistent rise six months afterward. Though predicting Bitcoin’s future price is hard, a supply cut suggests a likely price increase.
When an asset’s supply drops but demand stays steady or grows, prices tend to rise. However, this effect is gradual, as the available supply and previous bitcoin sales balance the new shortage.
Markets eventually feel the new shortage. Past cycles indicate a positive trend post-halving. History may not repeat exactly, but it often rhymes, hinting at future halving impacts.
