What is the Bitcoin halving?

By Anycoin Direct

You may have heard about the halving of Bitcoin. However, there are halving of many other coins. Today we are going to explain to you what these actually are.

Key indicators

✔️ Satoshi has arranged a reward for mining Bitcoin. For example, for every 210,000 blocks mined, there is a halving.

✔️ With a halving, the income of miners goes down, this may cause the number of miners to go down. Because it is no longer profitable.

✔️ After a halving a bull-run has always occurred.

What is the Bitcoin halving?

Bitcoin halving is an event where the reward for finding a new block on the Bitcoin network is halved and therefore the number of new Bitcoins.

Bitcoin miners (someone who approves transactions on the blockchain network) are rewarded in the form of Bitcoins. Every 210,000 blocks, these rewards are halved. This is called a Bitcoin halving.

When mining Bitcoin, in the early days you received 50 Bitcoin per block found. You got the rewards of a found block if you were the first to solve a cryptographic puzzle. This process is called mining. In this process, you approve all transactions from the past 10 minutes (in Bitcoin's case) and put them into a block, then add it to Bitcoin's blockchain.

So why does Bitcoin halving exist? Simply stated, it is designed to control Bitcoin inflation. Unlike fiat currencies, such as the euro or the dollar, there is a limited number of Bitcoin. Satoshi Nakamoto, the creator of Bitcoin, has arranged it so that every four years the reward for finding the solution to the puzzle gets you half as much. This may take a few months, because actually the halving of Bitcoin is initiated after every 210,000 blocks mined. In total, only 21 million BTC will be available, and most of them have already been mined. By halving the reward for miners every four years, Bitcoin's supply will expand more slowly and limit inflation. Nakamoto wanted the last Bitcoin to be mined around 2140 because around that time his grandson would turn 100.

If the same number of Bitcoins were mined all the time, the 21 million Bitcoins would be on the market much sooner. So Satoshi made up that every 210,000 blocks (about four years, 1 block every ten minutes) only half as many coins would be given as rewards for mining.

This is called halving. When the reward for adding a block is halved, in this case at Bitcoin.

There are a lot of coins that have halving. This has to do with the maximum number of coins there will ever be of a cryptocurrency.

Some coins have a roadmap, where somewhere on that calendar it says what the maximum number will ever be in circulation and when they will all be on the market. If that number is not infinite, they will probably also work with a halving, where the number that is added gets smaller and smaller.

There are also cryptocurrencies that have no halving because there is no cap on the number that can be added. A well-known example is Ethereum, which has a theoretically infinite number.

What are the consequences of Bitcoin halving?

If you are mining and your revenues are high enough in comparison to the costs you have to make, such as power costs and expensive equipment, then you have a reason to continue doing so.

Once your income goes by half it's questionable whether it's worth continuing. There are a number of possibilities here. For example, the number of miners may drop drastically because it is no longer profitable. However, what is most common, especially with Bitcoin, is that the price goes up significantly.

When the price goes up considerably, the miners, who are very important to Bitcoin, can continue their operations. Every four years so far we have seen that this is indeed the case.

Bitcoin halving 2012

The first Bitcoin halving dates back to Nov. 28, 2012. It was worth €20 at the time and shot up to about €500 in the years that followed. You still only got 25 Bitcoin per puzzle you solved.

Bitcoin halving 2016

The second halving was on July 2, 2016. The reward went to 12.5 Bitcoin and the price rose to €16,500 over the next few years.

Bitcoin halving 2020

The third halving was on May 12, 2020. The reward was reduced to 6.25 Bitcoin and the price rose to €60,000.

Bitcoin halving 2024

If we continue this line, we can well predict that the price of Bitcoin will be above €60,000 after 2024. It does seem that the price is stabilizing somewhat and on the way to the year 2028 there may be a price somewhere around €100-150 thousand per Bitcoin.

A derivative effect of Bitcoin's halving is the altcoin market. After all, cryptocurrency is also sold in pairs. For example, you can use Bitcoin to pay for Ethereum. If Bitcoin were the only coin to rise, you could buy the entire market with Bitcoin.

Of course, that never happened. As soon as Bitcoin rises, so do the other coins. Usually it's the other way around. After the Bitcoin halving, Bitcoin rises, but the altcoins rise much more. The best example of this is in early 2018, when altcoins went up by insane percentages. This is only thinly repeating in 2021, you just don't have certainties in cryptocurrency.

What happens after the last Bitcoin is mined?

After the last Bitcoin is mined (expected in 2140), no new Bitcoins will be added and no more halving will take place. By then, all 21 million Bitcoins will have been mined and put into circulation. This means new Bitcoins will never be added again. Miners will from then on validate transactions and add new blocks to the blockchain, without being rewarded with new BTC. However, they will receive a share of the transaction fees paid by the person conducting the transaction.

What to expect after the next halving?

The next halving is expected about the end of March 2024. Then miners will receive only 3.25 Bitcoin when successfully solving the cryptocurrency puzzle. That brings us to the expectations of this halving.

Effect next Bitcoin halving

A prediction can be made but one should not assume it with certainty. After all, the market is determined by supply and demand. Nevertheless, there are clues in Bitcoin's cycle that give us some guidance.

After a halving, a bull market still emerged. During this bull market, the price of Bitcoin went up and so did the altcoins. The altcoins always rose relatively more than Bitcoin. Therefore, this is all expected to happen again.

Let's go to CoinGecko to see what Bitcoin has done in the past. For that, we'll take Bitcoin's max chart.

After 2012, the price of Bitcoin increased about tenfold, but at that time there weren't that many altcoins, so we don't really need to look at that.

A crazy bullrun followed after 2016, with the price of Bitcoin going x20 and altcoins going up as much as 100x. January 2018 was the high point, after which altcoin prices sometimes had only a few percent left of their all-time high. Bitcoin maintained its value much better, losing "only" about 80 percent maximum.

In 2020 was the next halving. In April and November of 2021 there were two high peaks of Bitcoin, with this coin worth above €50,000 and nearly €60,000 each time. The story of altcoins during this period was ambivalent. At the initial peak, many coins went x10, then lost about 50% of their value in a single day at Bitcoin's flash crash in the spring of 2021. Then they recovered cautiously, but many coins no longer reached the heights they had before.

Then as we head toward the halving of 2024, we can make a cautious prediction. Last time Bitcoin went about x4 from its all time high a year after the halving. The altcoins went x10 or more, but often could not maintain their high levels after a flash crash of Bitcoin.

Given the previous flash crash, it is wise to take this into account and use stop losses in this coming bull market. Nothing is more annoying than standing on big gains, only to wake up half poorer, after which the market for the coins you have won't recover.

The countdown has begun. Only a little over a year left at this point and then it's time for the next halving. This is always an exciting time. Play it smart and good luck!

Test your knowledge

Question: 1/5What kind of market always follows Bitcoin's halving so far?
ABear market
BBull market
CShort squeeze