Bitcoin Halving: What Does It Mean and What It Did

TL;DR: The Bitcoin halving happened in April 2024 and reduced the number of tokens mined per day from 900 to 450. 

If you have read much about crypto in 2024, you have likely seen the price of Bitcoin soaring. The token has reached new all-time highs (ATHs), and investors are excited about the future of the digital currency. One of the leading causes of this excitement is the recent Bitcoin halving. The event, which occurred on April 19th, could have a huge impact on Bitcoin. 

What is Bitcoin Halving?

To understand the Bitcoin halving, it is important to understand how Bitcoin’s supply is situated. When the project was created by Satoshi Nakamoto in 2009, it was designed to have a known supply that could easily be predicted. This feature would solve some of the issues with centralized banks, as they can sometimes be erratic with increases in the money supply.

In practice, the Bitcoin supply is capped at 21 million tokens. The supply increases at a decreasing rate until it reaches the 21 million token limit, which is expected to happen in the year 2140. Until then, each new block awards a specified amount of Bitcoin to the miners and validators of transactions. 

A block is a way to divide up transactions in the Bitcoin network. Approximately every 10 minutes, the Bitcoin chain creates a new block, which stores transactions. This action makes the verification process smoother and more efficient. 

When a new block is created, miners use powerful computers to race and solve a cryptograph before anyone else. The winner receives a reward. As of right now, that reward is 3.125 BTC for every block. 

However, before the most recent halving, the block reward was 6.25 BTC. Halvings occur every 210,000 blocks, which is slightly less than 4 years. So, roughly around 2028, the next halving will occur and further lower the block reward to 1.5625 BTC per block. 

How Does a Bitcoin Halving Work?

In practice, the Bitcoin halving is written into the source code of Bitcoin. When a halving occurs, the code automatically begins counting down the blocks until the next halving. As noted above, there are 210,000 blocks between each halving. When the countdown reaches zero and the halving occurs, the code automatically lowers the amount of Bitcoin that is given to miners as a reward. This process is automatic, with no tapering; when the halving occurs, the amount of Bitcoin per block decreases instantly.

For example, when the next Bitcoin halving occurs, the 209,999th block since the last halving will award 3.125 Bitcoin. Once that block is verified, the halving will occur and the next block will be generated. This block will award 1.5625 Bitcoin. 

When is the Next Bitcoin Halving?

The next Bitcoin halving will occur when block 1,050,000 is reached. This may not mean much on its own, but many have looked at the average block time and extended it out to see when we could potentially reach that point.

According to these calculations, we could expect a Bitcoin halving around March 2028. However, this is subject to change, both due to the amount of transactions on the chain and mining power. 

What Happened the Last Time Bitcoin Halved?

During the past three halving events, Bitcoin has seen a small run in price beforehand, followed by a several-month period of sustained growth. It then sees a small pullback about one year after the halving before starting to run up in anticipation of the next one. Let’s take a closer look at what happened during the previous halvings. 

• Nov. 28, 2012: This was the first halving, bringing the block reward from 50 BTC to 25 BTC. This process was new at the time, so the then-small community was somewhat skeptical of how it could play out. Some, such as Vitalik Buterin, thought that it was already priced in, while others saw it as having a positive impact on the supply. Bitcoin ended up performing very well, surpassing the $1,100 level within a year.
• July 9, 2016: The second halving brought the block reward to 12.5 BTC. The community was still somewhat split on how the event could impact the price, but 2016 and  2017 proved to be strong years for BTC. The price went from less than $2,000 before the halving to a high of nearly $20,000 before the end of 2017.
• May 11, 2020: The most recent halving was a bit easier to read than the other two. With somewhat of a pattern developing, many were hoping that the price would increase greatly in 2020. Bitcoin did just that, going from around $8,000 in May 2020 to a then-high of over $67,000 in November 2021. 

How Does Bitcoin Halving Impact BTC Price?

The Bitcoin halving can impact the price of BTC in several ways:

• Less selling activity: One of the larger potential benefits of the halving is that it can decrease selling pressure on the market. Some miners will instantly sell any tokens that they receive so that they are not exposed to the underlying price fluctuations of Bitcoin. This can cause the price to go down. However, the halving decreases the amount of new tokens created each day, which could theoretically lower the amount of new tokens sold each day. 
• Increased demand: The halving could help increase the demand for Bitcoin in multiple ways. First, it could simply bring more attention to the token and cause more people to invest. It could also signal to traders that a price increase could be on the way, causing more buying activity. It could also change investors’ perception of the token, moving more towards scarcity and deflationary characteristics. 
• Less environmental strain: One of the largest concerns with Bitcoin is the huge amount of energy that is needed for miners to verify transactions. While this is still an issue, the halving could lessen the negative impacts. This is because smaller rewards mean that mining is potentially less profitable, causing some miners to exit the industry. This could lower the total energy consumption.  

Experts debate whether or not these impacts will be realized. The halving could already be priced in, miners may not actually influence the price as much as predicted, and the environmental impacts could be overhyped. 

Will This Halving Be Different?

The most recent halving, which occurred in April 2024, could have a big impact on Bitcoin’s price. Basic economic intuition would say that the halving should be positive for Bitcoin. However, there is also an argument that the halving is already priced in or that institutional adoption could hinder the ability to follow past market dynamics. With competing sides in the debate, it will be interesting to see how the halving impacts Bitcoin. 

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