Bitcoin Halving Events

On average, every 4 years (about 210K blocks), the reward given to Bitcoin miners for adding a block to the Bitcoin Blockchain is cut in half. Bitcoin halving was designed by Satoshi Nakamoto to control Bitcoin's inflation. Since the block reward halving essentially cuts the daily supply of bitcoins in half, many believe that this event will have a major impact on Bitcoin's price.

1. What does Bitcoin Halving mean?

To understand what Bitcoin Halving is, you must first understand the basic definitions of mining in the Bitcoin network. Generally, for a new Bitcoin to appear in the world, it will be a reward for miners whenever they mine a new block added to the public chain in the network. When Satoshi Nakamoto established the initial rules for the Bitcoin network protocol, he made two important provisions:

First, the supply of Bitcoin will be finite and limited to 21 million bitcoins that will ever be created.
Second, the number of bitcoins created per block, i.e. the reward, will be reduced by 50% every 210,000 blocks. And this event is the Bitcoin Halving.

2. Why do we have Bitcoin Halving?

Why is there a need to change the way new bitcoins are created? Why not keep the rewards the same? Is it unfair to miners? The answer to these questions lies in the law of supply and demand. If coins are created too quickly, or there is no end to the limited number of bitcoins created, there will eventually be too many bitcoins in circulation and they will have very little value.

The main reason why this is done is to control inflation.

3. How will Bitcoin Halving affect the price of Bitcoin?

This is the main question that most people want to know, will Bitcoin halving affect the price of Bitcoin? and the answer is no one knows.

According to classical economic theory, many people will think that the price of Bitcoin should increase, due to the decrease in the supply of Bitcoin in the market.

In the first Halving: November 28th, 2012, the Bitcoin block reward halving occurred for the first time after 210,000 blocks were solved. At that time, the price of Bitcoin was around 13 USD and the halving barely affected the price of Bitcoin. It was just that its price skyrocketed immediately after.

In the second Halving: July 09th, 2016, the Bitcoin block reward halving occurred for the second time after 420,000 blocks were solved. At that time, bitcoin was trading at $650 at the time of the event. A week later, the price was around $675, not much change. It was only a while later that the price continued to increase beyond the expectations of many people.

In the Third Halving: May 11th, 2020, the Bitcoin block reward halving occurred for the third time after 630,000 blocks were solved. At that time, bitcoin was trading at $8,572 at the time of the event.

In the Fourth Halving: April 19th, 2024, the Bitcoin block reward halving occurred for the fourth time after 840,000 blocks were solved. At that time, bitcoin was trading at about $64,200 at the time of the event.