Bitcoins Next Halving: Everything You Need to Know

One of the most eagerly awaited events on the Bitcoin network is the halving of Bitcoin (BTC). When the supply of new Bitcoins is halved, this event occurs. The purpose of this event is to slow the rate of inflation, which would then push the price of bitcoin higher.

Introduction

We must first understand how the Bitcoin network functions before describing a Bitcoin halving. Blockchain, the technology that powers Bitcoin, is essentially a group of computers (or nodes) that run the cryptocurrency's software and store a partial or full history of transactions on its network. The decision to accept or reject a transaction in the Bitcoin network rests with each full node or a node that contains the entire history of transactions on Bitcoin. To achieve that, the node performs several validations to ensure the transaction is legitimate. These include making that the transaction is within the specified length and has the appropriate validation parameters, such as nonces.

Each transaction is given a separate approval. It is claimed to happen only when every transaction in a block has received approval. Following approval, the transaction is broadcast to other nodes and added to the current blockchain.

The stability and security of the blockchain are increased by adding more computers or "nodes." By the end of August 2022, it was expected that 15,169 nodes would be running the Bitcoin code. As long as they have adequate storage to download the whole blockchain and its transaction history, anyone can easily join the Bitcoin network as a node, but not all of them are miners. A significant development in the history of bitcoin is the halving of its supply, which is half the total number of coins in circulation. The reward for mining bitcoin is halved, and the inflation rate is also halved. It also delays the creation of new bitcoins, which frequently causes inflation by lowering the supply.

But why is the price of bitcoins next halving so crucial? When is next Bitcoin halving event is going to occur? What will cryptocurrency experts do in anticipate if Bitcoin again halves? It's critical first to comprehend some technical aspects of how the Bitcoin network functions and how bitcoin mining generates revenue in order to understand halving better.

What Is Bitcoin Halving?

When the reward for mining new blocks is halved, or "halvening," miners receive 50% fewer bitcoins in exchange for validating transactions. Approximately every four years, or once every 210,000 blocks, until the network has produced the maximum number of 21 million bitcoins, bitcoins will be halved.

Because they lower the number of new bitcoins created by the network, bitcoin halvings are significant for traders. Due to the limited supply of new coins, prices may increase if demand is persistently high. While this has already occurred in the months before and after other halvings, driving up the price of bitcoin, each halving has its unique set of conditions, and the demand for bitcoin can change drastically.

The Bitcoin network creates new bitcoins every 10 minutes. Every 10 minutes, 50 new bitcoins were distributed during the first four years of Bitcoin's existence. This figure is halved every four years. A "bitcoins next halving" or "halvening" is the day that the sum halves.

Every 10 minutes, there were 25 fewer bitcoins issued in 2012 compared to 50. It decreased from 25 to 12.5 in 2016. In the most recent halving on May 11, 2020, the reward per block decreased from 12.5 to 6.25 BTC. The reward will decrease from 6.25 BTC every block to 3.125 BTC in the 2024 reward halving.

A Brief History of Bitcoin Halving

To understand how it functions and how much more difficult it is to mine bitcoin now than it was in 2009, we can examine the history of Bitcoin halving.

After the first bitcoin was mined, four years later, in 2012, the prize for mining was only worth 25 BTC. Only 12.5 BTC was given to miners for each coin in 2016. Rewards decreased to 6.25 BTC in 2020.

For a while, this scarcity tends to increase the value of BTC. However, it goes without saying that the price of Bitcoin is not independent of other factors, such as the general state of the economy, the stock market, consumer demand for Bitcoin, and investor confidence.

If the market is still going through a crypto winter before the subsequent event, watching how a halving event impacts BTC values will be interesting.

Is Halving Good for Bitcoin?

In general, "Is halving beneficial for Bitcoin?" can be answered with a loud "yes." Furthermore, while it might be more challenging for miners to earn bitcoin following a halving event, this scarcity frequently increases the value of the BTC they already possess.

In 2020, the price of bitcoin surged by 40%, and since its all-time low immediately before the halving event, it has increased by 85%. However, the economic downturn and the coronavirus pandemic-related economic anxieties cast a shadow over this event. For statistical information, a footnote will always be needed in the year 2020.

Nevertheless, the price of bitcoin ultimately increased as a result of the halving events in November 2012 and July 2016. The beginning of Bitcoin's most significant bull runs over a number of years have traditionally been heralded by this deflationary phenomenon, though not without first experiencing a lengthy sell-off, according to Reuters.

Reuters claims that between 2012 and 2014, the value of BTC surged by 10,000%. It increased by almost 2,50% from the middle of 2016 to the end of 2017.

How Does Bitcoin Halving Work?

Bitcoin's network's underlying blockchain technology software, which controls the rate at which new Bitcoins are created, is the reason why Bitcoin halving functions. The program makes the blockchain network's computers compete for transactions to be verified or "mining" for bitcoin.

When Bitcoin miners can demonstrate that the transactions they have chosen are genuine, they are rewarded with a number of new Bitcoins. Blocks are used to verify these transactions collectively, and the blockchain network is programmed to reduce the incentive given to miners every 210,000 blocks.

A shared, open, distributed ledger is the Bitcoin blockchain. A ledger is a spreadsheet or digital database that contains financial data, so once you realize this, the entire blockchain may start to make more sense.

Distributed Ledger

Distributed ledgers—in this example, the Bitcoin blockchain—are shared throughout a network. Every time the ledger is modified, the changes are distributed to all users across the network in the same form. It adds a fresh "block" of data to the chain. A hacker would have to change every version of the chain, not just the one with the original transaction, making it more difficult to tamper with or corrupt the chain. According to Bitcoin.org, a new block comprising many transactions is typically created every 10 minutes, verified, and mining is the process by which information is added to the blockchain. 

Cryptography

The ledger is kept safe by "cryptography," which also makes sure that no one can transfer bitcoins without authorization or successfully hack the blockchain. Additionally, customers' digital wallets are encrypted using cryptography to ensure that transactions cannot be completed without a password, also known as a private key. Financial organizations and e-commerce websites both use cryptography as a security measure for customer payments and personal data. However, bitcoin mining is crucial in ensuring that the Bitcoin network is safe and that each transaction is legitimate.

What Are the Effects of Bitcoin Halving?

Because it makes it evident when the published bitcoin price rate declines, bitcoins' next halving is crucial. The US$ 21 million caps on coin supply releases enable forecasting of the total number of coins in circulation across various time frames. The coin supply, for instance, was US$ 18.85 million in October 2021. The remaining US$ 2.15 million was given to the miners as a reward.

In addition, Bitcoin Halving is one of the factors driving up the price of the coin since it reduces the number of coins in circulation every four years. It results in a "shortage" of coins, which drives up the coin's value and demand for it.

The reward for building new blocks is visibly decreased as a result of the halves. The following halving will reduce it to 3.125 Bitcoin.

Mining

Large organizations or groups collaborate in bitcoin mining in order to split the earnings. The hardware is designed specifically for mining Bitcoin, and the average income a miner may produce depends on the network's hash rate and their hashrate. Energy expenses must also be taken into account by miners.

Hashrate

Hashrate, which can be measured in billions or quintillions, is a measure of how many calculations (guesses of the hash) can be done in a second. 1TH/s, or one trillion computations per second, is the hashrate.

A halving is a big deal for everyone in the mining industry because it means that you will only be making half of what you did last week this week. Consider a gold mine that was aware that the amount of gold it was extracted from the ground would be cut in half every four years. Although bitcoin miners' expenses stay the same, their incomes decrease by roughly 50%. When halvings occur, a few miners frequently decide it is no longer profitable for them to continue mining and quit utilizing their equipment to mine other cryptocurrencies. For the miners that decide to stay, this does, to a limited extent, reduce the network's hash rate, but it does not make up for the income loss.

What Is A Bitcoin Halving Chart?

The inflation rate of Bitcoin for each period is shown in the figure below.

The inflation rate of Bitcoin declines with each bitcoins next halving. The number of bitcoins issued in total is represented by the blue line. while the orange line represents the inflation rate of bitcoin during a specific time period.

When Bitcoin will be halved depends on the block height, not the date. Every 210,000 of them reduces a block by half. In 2024, Block 840,000 will be cut in half.

Let's examine this graph in more detail because it helps explain how previous price halvings affected prices. Starting with the reddish block on the left, we'll look at each of Bitcoin's four "ages" individually.

1) Pre-Halving Era

Time Span: January 9, 2009, to November 28, 2012.

Block Span: 0 to 210,000.

Block Reward: 50 BTC per block mined.

The first block was the beginning of Bitcoin when it was virtually unheard of by the general public. Satoshi set the first block reward at 50 Bitcoin. Therefore, a miner created and earned 50 BTC for each block they added to the chain. A quick early issuance was the outcome of this high reward, with 50% of Bitcoin's total quantity (21 million BTC) being released during this initial era.

Since he was essentially the only miner for the majority of 2009, Satoshi personally got a sizable portion. Aside from technical curiosity, there wasn't much of a reason to join in early mining since BTC hadn't yet established any actual value. The first exchanges to appear in late 2010 marked the establishment of a price point exceeding $1. This proof of worth quickly drew in more miners, raising the bar and igniting competition for ever-more-rapid mining equipment and less expensive power.

Early adopters saw that Bitcoin had the potential to develop significantly in the future as awareness of the potential of this new technology spread and a reliable market value gradually emerged.

Thus, those who had foresight sucked up Bitcoin's plentiful early supply. Due to the increased demand, dealers started setting higher prices for their coins, which caused Bitcoin to see its first price increase above $10. The market realized that the price support provided by the halving in late 2012 would cause a drop that was quickly followed by a recovery. At the end of this era, the pattern of an increasing price followed by a halving was established.

2) 1st Halving Era

Time Span: November 28, 2012, to July 9, 2016.

Block Span: 210,000 to 420,000.

Block Reward: 25 BTC per block mined.

Given that 50% of the BTC supply was created during the initial period, it makes sense that 75% of the supply had been created at the end of this phase. According to the supply and demand economic theory, prices must increase if supply declines while demand remains stable or rises. It was amply demonstrated in the second Bitcoin era when the price soared sharply.

As expected, increased demand (and growing public knowledge) increased the price of bitcoin during this time period. Price spiked explosively beyond $1,000 in late 2013 before plummeting as Mt. Gox, the dominant exchange at the time, went bankrupt. A protracted period of decline and stabilization resulted from this. Significantly, the price continued to trade above the peak of the preceding era, sustaining a long-term positive chart. The likelihood of the 2016 halving encouraged it to pick up the pace of growth.

3) 2nd Halving Era

Time Span: July 9, 2016, to mid-May 2020 (estimated).

Block Span: 420,000 to 630,000.

Block Reward: 12.5 BTC per block mined.

We have finally reached the present day. A little over 89% of all Bitcoin will be issued by May of this year. One distinction from earlier periods is the lack of the customary trend of a steady price increase around a year before the halves. The effects of the enormous PlusToken Ponzi scheme in China may be one cause for this. Experts in blockchain research claim that the vast $2 billion worth of Bitcoin amassed by scammers is still being sold off. This significant selling volume is apparently restraining the price of Bitcoin.

Nevertheless, many people predict that barring any significant shake-ups in the current crypto ecosystem, once the next halving occurs, Bitcoin's price will have to rise due to diminished supply.

What Happens During Bitcoin Halving?

Most investors think that between now and its fourth halving in 2024, Bitcoin's value will rise, and it might experience better growth. It is based on its historical performance as well as the outcomes of the first and second halving events. The two times preceding this one saw a big rise in the price of Bitcoin.

In the year following the original halving in 2012, the price of Bitcoin increased from $12 to over $1,150. The price of bitcoin rose to around $20,000 after the second halving in 2016 before dropping to $3,200. The reduction in the mining incentive hasn't been given a definite date either. The answer will be revealed when the 210,000th block has been mined since the most recent event. After the next halving, which is estimated to take place somewhere in early 2024 given that new Bitcoins are currently being minted around every 10 minutes, a miner's payout will drop to 3.125 BTC. The regular major instability and turmoil that a halving of cryptocurrency sometimes creates should be known to investors or dealers in bitcoin.

The eagerly awaited Bitcoin halving event takes place every four years; the first one was in 2012. The programming of the virtual money necessitates that the total supply remain constant. Nobody can completely foresee what will happen after the halves and in the days, weeks, or months that follow, even if previous halves have caused significant price movements. It's a common belief that miners will stop operations following the halving. The majority of miners are actually quite wise and factor in the halving, so they don't actually shut down any miners.

When referring to Bitcoin, the phrase "halving" refers to the proportion of tokens contained in a newly generated block. When Bitcoin first started in 2009, each block had 50 BTC in it, but this number was scheduled to decrease by 50% about every four years. Three halving events have occurred today, and a block now only holds 6.25 BTC. Upon the subsequent halving, a block will only hold 3.125 BTC.

The Theory Behind Halving

According to the hypothesis of halving, the following series of events would take place:

The miners' incentive remains despite the decreased reward, raising the value of Bitcoin in the process. The reward is half, inflation is halved; there is a reduction in the amount of supply, an increase in demand, and a price increase.

Since the return is smaller and the price of Bitcoin does not rise as a result of the halving, all miners will cease operations. There is a method to assist, though. The mining difficulty can be changed to make mining simpler if the reward is halved and Bitcoin's value does not rise. It indicates that the reward stays the same while the processing challenge is lessened.

Only a few miners have stopped working as a result of Bitcoin's price rise, more than making up for the initial loss in earnings after three successful halves. The crashes after the roughly one-year runup have kept prices higher than they were after the halving event was through.

What's Next?

If the historical pattern holds, we have most likely hit the peak that will be reached before the subsequent halving in 2024 and the post-halving runup following the 2020 halving. It is still unclear if the 2024 halving will cause a significant runup to occur or if a runup will start before the halving, with investors looking to profit from the anticipated runup pattern. An eventual smoothing of the entire pattern is what might take place. According to past returns, the enormous benefits appear to be decreasing with each half, and this smoothing may be the outcome. Only time will tell; before the upcoming March 2024, halving is the time to look out for.

Bitcoin Halving Dates History

I'd want to start by making it clear that the phrase "Bitcoin halving" does not refer to a reduction in price or halves in the value of bitcoin. The term "halving" in the context of cryptocurrencies refers to a reduction in half of the tokens or coins that miners are rewarded with for adding new transactions to the blockchain (i.e., the reward for mining new blocks). While many cryptocurrencies undergo a halving, not all do. However, the halving of the Bitcoin block reward receives the most attention from the media.

One halving occurs every 210,000 blocks for Bitcoin (BTC). Currently, it takes about 10 minutes to complete one block on the Bitcoin blockchain. A BTC halving will therefore occur roughly every four years. The Bitcoin code includes these halvings, which will keep happening until the network has produced the maximum number of 21 million Bitcoins. After the third halving in 2020, the current Bitcoin block reward is 6.25 Bitcoins per block.

In this section, the first two halves will be reviewed.

2012 Halving

On November 28, 2012, the first block halving took place. It was for the year 2012—the Radeon HD 5800 miner used by SlushPool to create the halving block.

New BTC Per Block Before: 50 BTC per block

New BTC Per Block After: 25 BTC per block

Price on Halving Day: $12.35

Price 150 Days Later: $127.00

2016 Halving

On July 9, 2016, there was a second halving.

New BTC Per Block Before: 25 BTC per block

New BTC Per Block After: 12.5 BTC per block

Price on Halving Day: $650.63

Price 150 Days Later: $758.81

2020 Halving

It was halved again on May 11, 2020.

New BTC Per Block Before: 12.5 BTC per block

New BTC Per Block After: 6.25 BTC per block

Price on Halving Day: $8821.42

Price 150 Days Later: $10,943.00

Next Bitcoin Halving Dates and Price: 2024 and Beyond

The fourth Bitcoin halving date will occur on BTC block number 840,000, which is anticipated to occur in the first part of 2024 as of this writing (between February and May).

2024 Bitcoin Halving Schedule

Expected: 2024

Block number: 740,000

Block reward: 3.125 new BTC

Total new Bitcoins: 656,250 BTC

2028 Bitcoin Halving Schedule

Expected: 2028

Block number: 850,000

Block reward: 1.5625 new BTC

Total new Bitcoins: 328,125 BTC

Please comment with your expected Bitcoin price for the upcoming 2024 halving. After the next Bitcoin halving, we'll update this article with the closest winner.

What Happens When There Are No More Bitcoins Left?

The supply will eventually approach its hard cap, at which point subsequent blocks won't reward miners with bitcoins. They will, after that, only be compensated with transaction fees for their network involvement. To mine bitcoin, miners need expensive computing equipment.

The examples mentioned above are only a handful of the many ways. Bitcoin mining can continue to be profitable when the block reward disappears.

Additionally, because the block reward progressively declines over time as opposed to abruptly evaporating, miners have the opportunity to gradually adapt and adjust to relying more on transaction fees than on revenue from generated bitcoins. The most likely combination of things that will maintain miners, in the long run, is the development of mining technology and the constant rise in the value of Bitcoin. However, we shouldn't let our imaginations restrict how we see the future. Being unable to fathom something does not make it unimaginable; the market economy's daily spontaneous evolution and shifts serve as a constant reminder of this.

There are two ways this circumstance could occur in accordance with the adage, "The lower the supplies, the higher the price." One is that there is a bottleneck in the supply of bitcoins, and no more coins can be mined. It will result in a rise in the price of bitcoin in the present market. The same is true for gold, which is becoming scarcer and scarcer. Two, the market is collapsing because no one is utilizing bitcoin any longer. Therefore, the lack of users is akin to the currency having no value, which lowers its price.

What is the Significance of the Bitcoin Block Halving?

The halving event is very immediate and important since it represents a further decline in the rate of new Bitcoin production as its supply nears its limit. There are 21 million Bitcoins in circulation at any given time.

The number of new bitcoins created per block is reduced by half. Since there are fewer new bitcoins available, purchasing will cost you more. Lower supply and constant demand typically result in higher pricing in normal markets. The halving has typically come before some of Bitcoin's most extensive runs since it cuts the supply of new bitcoins while demand remains stable.

The figure below's vertical blue lines represent the past three halvings (2012-11-28, 2016-7-9, and 2020-5-11). Take note of how the price has increased considerably with each halving.

The halving event's noticeable modifications increase network efficiency and growth every time it happens. The mining reward is halved with each Bitcoin halving. It causes the rate of inflation to decline significantly. The incident also results in a smaller amount of coins being available, which is followed by a striking rise in demand and the coin's price. Due to the fact that the halving event almost always results in a big increase in the price of Bitcoin, miners are less concerned about the loss in compensation it frequently causes.

Lower supply combined with constant demand typically translates into higher costs. The halving has thus typically come before some of Bitcoin's biggest runs since it cuts the supply of new coins while maintaining a stable demand.

What Changes With Bitcoin Halving?

Miners would lack motivation in the event that a halving did not raise demand and price. There would be less incentive to complete transactions, and Bitcoin's value would not be sufficient.

In order to avoid this, Bitcoin includes a procedure for altering how difficult it is to earn mining incentives, or how difficult it is to mine a transaction. The difficulty of mining would be lowered to keep miners motivated if the payout had been cut in half, but the value of Bitcoin had not increased. As a result, although there are still fewer bitcoins given as rewards, transaction processing is now simpler. Twice, this method has been successful.

As an illustration, during the 2017–2018 bubble, the price of a bitcoin increased to over $19,000 before dropping to about $3,700. The bitcoin price before the halving was over $650, which is a significant decrease. Even though this strategy has been successful thus far, future market reactions to the halving are uncertain because they are frequently accompanied by a great deal of hype, speculation, and volatility.

In addition to taking place during a global epidemic, the third halving also happened amid greater regulatory scrutiny, institutional investment in digital assets, and celebrity hype. These extra considerations make it difficult to predict where the price of bitcoin will ultimately settle.

How will the price react to the bitcoin halving?

The reaction of prices to the half of bitcoin cannot be predicted with precision, though.

The bitcoin price climbed both the year before and the year after each of the two previous halves. Both events took place against a backdrop of a generally robust cryptocurrency market and a steady global economy, which, thanks to the impacts of Covid-19, made 2020 a fundamentally different situation.

Another important thing to keep in mind is that this event is well-expected and that some of the possible increases in bitcoin's value may already have been taken into account. However, having the right tools on hand will be essential if you want to benefit from any potential move from the halvening.

A great way to get started is to open a free demo trading account, which will allow you to practise your trading strategies and concepts in a virtual trading environment until you are ready to trade on a live market. It's a great chance to hone your trading skills until you're ready for a live account. You can also take advantage of a lot of benefits, like free market analysis, strong Trading Central indicators and tools, and much more!

Tips to Trade during Bitcoin Halving

During the halving of Bitcoin, there are two ways to trade.

1. Predict the price of the cryptocurrency using derivatives like CFDs

2. Spend cash on an exchange to buy the coins directly.

When you trade cryptocurrencies using derivatives like CFDs, you can:

1. Trading absent a wallet or exchange account

2. Extending or shortening

3. Use leverage to your advantage

Bitcoin Halving Economics

The supply is decreased by the halving, which also increases the supply because halvings typically attract a lot of media attention and new customers. It has had effects on investments that are comparable to those experienced by other assets with limited or restricted quantities, such as precious metals, where there is greater demand and a consequent price increase.

The inflation curve for bitcoin is fascinating:

The blue line represents the total supply of Bitcoin, which will be approximately 19 million in 2022. The 21 million caps on the total supply of bitcoin are growing closer and closer (around the year 2140). The orange line shows the rate of inflation for bitcoin, which is cut in half every four years. The rate, which is now about 2%, will continue to decrease with each additional block and a half.

Investment

Investors in Bitcoin can use historical data to forecast how the 2024 price halving would impact the value of their investment. Previous Bitcoin price halvings led to significant price increases. Following the halving in 2012, Bitcoin's price increased from $12 to $1213. The second 2016 halves price was $647; the year after, it rose to $19.800 before dropping back to $3,276 the following year, remaining 506% above its halving price. The most recent price halving for bitcoin occurred in May 2020, when it was trading at $8,787. In 2021, it reached a high of almost $68,000, from which it has since plummeted to $42,000, an increase of 377%.

These patterns are apparent when we look at the previous halvings (on a log scale). Following the halving, the price of Bitcoin rises sharply, but then there is a protracted bear market before it rises once more at the subsequent halving.

The Bottom Line

Even if there is little that can be done either at the time of or after the Bitcoin halving event, finding a reliable platform with a solid track record to trade Bitcoin is always a good idea. It's also essential to look for patterns in previous halve situations in order to have a better grasp of what will happen. Bitcoin halving reduces the rate at which new bitcoins are put into circulation by half and imposes artificial price inflation on the cryptocurrency network. The proposed 21 million limits for bitcoin are anticipated to be achieved in the year 2140, at which point the rewards system is anticipated to end. After then, fees will be paid to miners for handling transactions.

Each block in the chain that was mined in 2009 earned a reward of 50 bitcoins. After the initial halving, there were 25, then 12, and then, as of May 11, 2020, there were 6.25 bitcoins for every block. Significant repercussions for the network follow Bitcoin's halving. Investors should anticipate a price increase in the days preceding the halving and following it. The halving event may lead to a consolidation of the ranks of miners as lone miners and tiny enterprises leave the mining ecosystem or are absorbed by more powerful actors.

This article does not constitute a recommendation by Investopedia or the author to invest in cryptocurrencies or other Initial Coin Offerings ("ICOs"). Investing in cryptocurrencies and other ICOs is very hazardous and speculative. Before making any financial decisions, it is always advisable to get the advice of a knowledgeable specialist because every person's circumstance is different. Investopedia makes no guarantees or claims on the timeliness or accuracy of the information provided here.