Understanding the Bitcoin Halving

Credit: Forbes

If you’ve been paying any attention at all to crypto, then you’ve probably heard these words repeated over and over recently — the Bitcoin halving.

Crypto enthusiasts and especially Bitcoin maximalist tend to talk about the “halving” as if it’s the Second Coming, an event of such magnitude that it commands an almost pseudo-religious significance amongst true believers.

But what exactly is the Bitcoin halving, when will it arrive, and what should we expect?

What is the Bitcoin Halving?

When Bitcoin was launched in 2009 by anonymous creator Satoshi Nakamoto, the goal was to create an international digital currency that operates outside the control of central banks and federal governments.

Unlike the Federal Reserve which can print money at will, Bitcoin was created with a strict protocol: There will only ever be 21 million coins created. The goal? To give the world a scarce asset that cannot be devalued through inflation, which hypothetically (and true thus far), will make Bitcoin more valuable as time goes on.

But besides the limited supply of Bitcoin and its release into the world at a predetermined and ever-slowing rate, there was another strategy etched into the code of Bitcoin: the halving.

The Bitcoin halving is a predetermined event that happens about every four years or after the mining of 210,000 blocks. The event brings about a 50% reduction in the amount of new bitcoins available to miners.

After this year’s halving, which is set to occur on April 19th or 20th, miners who successfully validate transactions will receive 3.125 BTC as opposed to the 6.25 BTC they currently receive, and the amount of available Bitcoin will drop from 900 to 450 per day. Ultimately, this makes Bitcoin rarer and harder to acquire, which should make it more valuable.

How have halving events effected BTC’s price historically?

So far, there have been three halving events in the history of Bitcoin. They occurred in 2012, 2016, and 2020. In each case, Bitcoin’s price rose significantly in the months that followed.

Five months after the first halving, Bitcoin’s price rose from $12.35 to $127 a coin. Eight months after the second halving, Bitcoin’s price doubled to reach $1,280. After the third halving in 2020, Bitcoin’s price went from $8,700 to $60,000 in less than a year.

Of course, just because previous halving’s have sent Bitcoin’s price soaring, doesn’t mean it’s a guarantee. If we know anything about Bitcoin, it’s that the price can be volatile and unpredictable. However, one thing is certain: the Bitcoin halving decreases the supply of Bitcoin that’s available. That means that if the demand stays the same, then the price should rise.

We’re in Unchartered Territory

This year marks the first time Bitcoin’s price has reached in all-time high before the halving ($73,737 on March 14th 2024). It’s also the first time we’ve had a halving event after the introduction of Bitcoin ETFs, which opened up the digital asset to mainstream investors and institutions. These two factors have many in the Bitcoin community riled up and talking about a “parabolic” run in the months to come.

What remains to be seen is whether the Bitcoin halving has already been priced into the market, and if traders who “bought the rumor” will “sell the news.” Some pessimists in the space believe that’s the case, and that the price of Bitcoin will actually fall after the halving.

Regardless of what happens to Bitcoin’s price in the next couple of days, weeks, and months, most people in the space who’ve adequately “packed their bags” are excited about the halving and they should be. For besides the price action that’s being anticipated, the halving also shows that Bitcoin is still functioning as it was originally designed back in January 2009. And whether you believe in Bitcoin or not, that’s a big deal.

In case you missed it: