Bitcoin halving: everything you need to know
For those who invest in cryptocurrencies, this is one of the most anticipated occasions. Every four years, there is a bitcoin halving that is anticipated to take place in April.
It happens consistently, around every four years. Halfing is a significant occurrence in the cryptocurrency ecosystem, having been included into the Bitcoin code by its creator, the enigmatic Satoshi Nakamoto.
The term "halving" describes the point at which bitcoin miners' compensation is cut in half. Every time 210,000 blocks are mined, it occurs. On the Bitcoin blockchain, a block is a file holding one megabyte (MB) of transaction data.
The next halving should happen in the middle of April, based on the rate at which new Bitcoins are being mined. The time frame should be used with caution, though, as it can take up to 30 days for miners with less powerful hardware to mine a bitcoin, compared to just 10 minutes for those with stronger hardware. Since the founding of the mother of cryptocurrencies, there will be four halvings.
Miners are people or organisations that create bitcoin or run the network by utilising specialised hardware with a lot of processing power. To do this, students must solve a challenging maths problem in order to compete for the privilege of adding the next block. A "hash" is the randomly generated 64-character output produced by this method. Miners then lock the block to prevent further modifications, completing the process. After then, they get their pay.
The term comes from the fact that the reward given to miners for each validated block drops by half with each halving. This reward was 50 BTC when Bitcoin was first founded in 2008; it then decreased to 25 BTC in 2012, and so on. The reward will rise from 6.25 BTC to 3.125 BTC at the subsequent halving.
Both the halving of the bitcoin supply and the ultimate 21 million unit cap are fundamental components of Satoshi Nakamoto's concept. Theoretically, assuming demand stays constant, slowing down the rate at which bitcoin is issued will raise its price.
We decrease the rate of generation of new bitcoins by half mining payouts. Because they must scale back their operations to make a profit on a smaller block reward, miners become more competitive and eject less productive miners. The professionalisation of mining, which is currently primarily done by huge miners or specialised corporations, is another effect of this mechanism.
Over 19 million of the 21 million bitcoins that have been created to date—or roughly 89% of the total—have been mined and are in use. Every day, about 900 new bitcoins are added to the network through mining. The last bitcoin is predicted to be minted around 2140.
Bitcoin prices have historically increased significantly before and after halvings. The initial halving of Bitcoin took place on November 28, 2012, at a price of about $12. A year later, the price had increased to about $1,000.
The price of bitcoin dropped to $670 on July 9, 2016, the day of the second halving, and then increased to $2,550 in July 2017. In December 2017, Bitcoin also hit its previous all-time high of about $19,700. At the time of the most recent halving in May 2020, the price of bitcoin was $8,787. It reached an all-time high of around $69,000 in November 2021.
There are more aspects to take into account, and past performance does not guarantee future outcomes. However, most observers are encouraged to be positive because this halving occurs at a time when an Ethereum spot ETF may be approved, and just a few weeks after the bitcoin spot ETF was approved.
Caution is advised, according to a recent Coinbase and Glassnode analysis on the matter. "There have only been three halvings historically, so it's difficult to really see a pattern emerge, especially considering how external factors like government economic measures have affected previous events."