What's the Bitcoin Halving?

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22 Apr 2024

What's the Bitcoin Halving?

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Bitcoin is coded with numerous features that allocate a total maximum supply of 21 million BTC. Its primary characteristics include a fixed supply and a reduction in block rewards roughly every four years, known as the 'Bitcoin halving.'
In 2012, the reward per block was 25 bitcoins, decreasing to 12.5 bitcoins per block in 2016. As of March 2023, miners receive 6.25 bitcoins per block as a reward. The halving mechanism was integrated into bitcoin's mining algorithm to combat inflation by upholding scarcity. Theoretically, the decrease in the rate of bitcoin issuance suggests that the price will rise if demand remains constant.
Currently, bitcoin experiences an inflation rate of under 2%, which will further diminish with subsequent halvings, according to David Weisberger, CEO of CoinRoutes trading platform. Given the fixed supply of bitcoin at any given moment, its inflation rate is relatively straightforward to determine.
Chris Kline, chief operating officer of Bitcoin IRA, remarks, "Bitcoin's limited production is what defines its finite nature, and as rewards decline, the supply is restricted." He adds that an increase in demand when the supply is limited positively influences the price, making bitcoin attractive to investors.

How does it work?

A decentralized network of validators engages in the process of mining to verify all bitcoin transactions. They receive a reward of 3.125 BTC when they successfully solve complex mathematical problems to add a batch of transactions to the bitcoin blockchain, as part of its proof-of-work mechanism.
At the current price of bitcoin, 3.125 BTC is valued at approximately $200,000, providing a significant incentive for miners to maintain the smooth operation of adding blocks of bitcoin transactions. These blocks of transactions are added approximately every 10 minutes, and according to the bitcoin code, the reward for miners is halved after every creation of 210,000 blocks. This reduction occurs roughly every four years, often accompanied by increased volatility in the price of bitcoin.

How many Bitcoin halvings have occurred?

So far, four Bitcoin halvings have occurred: the first in November 2012, when the block reward was reduced from 50 bitcoins per block to 25 bitcoins per block; the second halving dates back to July 2016, when the block reward was halved from 25 bitcoins per block to 12.5 bitcoins per block; the third halving occurred in May 2020, reducing the block rewards from 12.5 bitcoins per block to 6.25 bitcoins per block. Lastly in April 2024 it was occurred. Reducing the block rewards 6.25 bitcoin per block to 3.125 bitcoins per block.

What is the effect of this Bitcoin halving on the price?

The halving can impact the price of BTC:
Reducing rewards supports the healthy and sustainable growth of the network. By slowing down the production rate of new bitcoins, the halving ensures that the Bitcoin supply remains limited and finite, which may help preserve its value over time.
The inflation rate of Bitcoin decreases after the halving, meaning the influx of new coins into the market diminishes.
This topic is frequently debated among both market analysts and participants. Some believe that the halving will lead to a significant increase in the price of Bitcoin because the decrease in inflation rate will result in higher demand and, consequently, value appreciation. Others argue that the halving is already priced in the market and will have no effect on the price of the cryptocurrency.

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Reference:

What Is Bitcoin Halving? – Forbes Advisor

Bitcoin Yarılanması Nedir ve BTC Fiyatını Nasıl Etkiler? (crypto.com)

Bitcoin Madencileri Halving Sonrası Fazla Kazanıyor: Fiyata Etkisi Ne Olabilir? - Koin Bülteni (koinbulteni.com)

Bitcoin Halving, What is it and What Will Happen When all the Bitcoins are Mined? - Crypto Economy (crypto-economy.com)

BrankoPetruci tarafından INDEX:BTCUSD sembolü için 🎯Halving (Yarılanma) Nedir? Bitcoin Fiyatına Etkisi Var mıdır? — TradingView

Bitcoin Yarılanması: Bilmeniz gereken her şey (coinbase.com)