Bitcoin halving is a significant event in the cryptocurrency world
What is Bitcoin Halving?
Bitcoin halving, which happens roughly every four years, cuts the rate of new Bitcoin creation by half. This event is tied to the method of recording and generating Bitcoins. Transactions are logged on a blockchain, a ledger accessible to all.
Miners compile transactions into blocks and connect them by resolving cryptographic challenges, earning new bitcoins as their reward.
Satoshi Nakamoto, the enigmatic creator of Bitcoin, designed the cryptocurrency to have a maximum circulation of 21 million coins. To ensure this, the Bitcoin protocol halves the reward given to miners every 210,000 blocks, an event that occurs approximately every four years.
The Latest Halving
The latest Bitcoin halving took place in the early hours of Saturday 20th April 2024, reducing the reward for adding a new block of transactions to the blockchain from 6.25 Bitcoins to 3.125. Bitcoin’s halving will persist until the total supply approaches the 21 million cap, anticipated around the year 2140.
Impact on Bitcoin Price
The halving of Bitcoin reduces the number of new coins entering circulation, which, in theory, could drive up the price if demand remains constant.
According to economic principles, a stable demand coupled with a reduced supply should lead to a price increase.
Analysis of the three previous halvings (in 2012, 2016, and 2020) indicates an average price surge of 16% in the 60 days post-halving.
Typically, investors see the highest price increase approximately 500 days following a halving event.
Despite a recent drop from its peak, Bitcoin holds a high-level interest for crypto investors, even with its volatile behaviour. It has posted a 40% increase in 2024 compared to the same period last year.
In summary, the halving of Bitcoin reduces the availability of new coins, which could lead to an increase in value. However, the complete effects may only become apparent gradually over time.