Bitcoin Halving: What You Should Know
The bitcoin halving process is the process of decreasing the rewards miners receive for mining bitcoin. After every 210000 blocks are mined, the rewards will be halved.
This was not a good year for Crypto with the bear market, FTXsβ collapse, the decline in NFT activity, and more. Unsurprisingly, Bitcoin is now just under 17,000$ after losing more than 65% this year. However, could it be that Bitcoinβs decline stems from a reason almost unrelated to all of the above-mentioned factors and derives from something related to Bitcoinβs core structure: Halving periods.
What Is Bitcoin Halving?
As most of you should know by now, Bitcoin is an independent and self-regulated crypto coin that is managed primarily by independent laws that are codes embedded into the system. These laws, for instance, determine how new Bitcoins are created: bitcoin miners who compete among themselves in solving complicated math problems add new blocks into the system. Whoever solves the puzzles first gets to add the new block to the blockchain (each block contains the records of all the transactions that have been made in a certain period).Β
These miners that maintain the blockchain invest their time and money (due to massive electricity expenses). They do that because they are rewarded in bitcoin. How much are they rewarded for? That is an interesting point.Β
Bitcoin started in 2009. When miners mined new blocks in 2009, they received 50 BTC per block. However, November 2012 was the first halving event: Following November 28th, 2012, the reward for each block was cut in half to 25 BTC per block. July 2016 was the 2nd halving day, after which the reward was again cut in half to 12.5 BTC per block. May 11th, 2020, was the third halving date when the BTC reward was again cut in half to 6.25 BTC per block.
These halvings were meant to regulate the supply of Bitcoin: The first Halving occurred after 10.5 million blocks were mined. The 2nd, After 15.8 million. The 3rd, about 18.4 million. Meaning each halving date happens once every four years, and after half of the previous about of Bitcoin is Mined. The next Halving period will occur in 2024 (the date is undisclosed yet). Four years after that will happen the 5th halving event. After the 6th mining event, Bitcoin mining will stop completely, bringing Bitcoin blocks to the planned total of 21 million.
How Does It Affect The Price Of Bitcoin
If we look at the history of Bitcoin prices in light of its halving events, we quickly notice an interesting pattern. Before each halving date, Bitcoin is declining. Following each halving date, Bitcoinβs price climbs to new peaks for about two years before dropping again until the next halving date. This pattern has repeated itself every time so far.Β
Even todayβs low price is consistent with this Bitcoin halving price theory. If this pattern repeats itself again, Bitcoin will start to climb in 2024, after the next halving event.
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