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One of the most important characteristics of Bitcoin is its resistance to inflation. Currently, Bitcoin’s inflation rate is less than 2%, and it is expected to decrease even further thanks to a mechanism called ‘Bitcoin Halving.’
Through Bitcoin halving, the supply of new coins is regulated to retain Bitcoin’s value by making it scarce. In this blog, we will understand everything about this phenomenon and explore the economics behind it. We will also examine the effects of halving on price movements and market sentiment. If that sounds exciting, let’s get going.
Bitcoin is an ingenious virtual currency. New coins are introduced in the network through ‘Mining’ — a process where miners use their computational resources to verify Bitcoin transactions and, in return, earn new Bitcoins as a reward.
Learn more: Bitcoin Mining: A Comprehensive Guide
Bitcoin halving is an event where the mining reward is reduced by 50%. The halving occurs once every four years. For instance, in 2009, when Bitcoin was conceptualized, miners were rewarded 50 Bitcoins every 10 minutes for validating transactions. After two consecutive halving events, in 2012 and 2016, the mining reward was reduced to 6.25 BTC by 2020.
Bitcoin halving will continue until the total Bitcoin in circulation reaches 21 million. It is estimated that this could happen by 2140.
Bitcoin halving is important as it protects Bitcoin from inflation. Here are a few reasons why having is built into Bitcoin’s algorithm:
Any currency that wants to retain its value has to have a controlled supply. When the number of new coins generated is reduced over time, the currency becomes more valuable and less likely to be inflated.
Halving event slashes miners’ reward by 50%. Thus, if miners want to remain profitable, they must modify their operations so they can keep working with lower block rewards. This, in turn, drives less productive miners away, thereby making the network more secure.
Halvings are believed to have boosted Bitcoin’s prices over the years. In the months preceding halving, several traders and investing firms buy Bitcoins in large quantities, which results in an increase in their price.
So far, only three Bitcoin halving events have occurred since its inception. After every event, the block reward was slashed in half to ensure Bitcoin remains scarce and retains value in the long run.
| Halving Date | Block Reward Before Halving | Block Reward After Halving | Pre-Halving Price | Post-Halving Peak Price (Year) | Peak Price Increase |
| Nov 28, 2012 | 50 BTC | 25 BTC | ~$12 | ~$1,170 (Nov 2013) | ~9,750% |
| Jul 9, 2016 | 25 BTC | 12.5 BTC | ~$650 | ~$19,400 (Dec 2017) | ~2,900% |
| May 11, 2020 | 12.5 BTC | 6.25 BTC | ~$8,590 | ~$67,450 (Nov 2021) | ~750% |
| 2024 (expected) | 6.25 | 3.125 | ~$42,727 (Dec 2023) | ~$100,000 (expected) | ~134.044% |
A halving event can mean different things for different groups.
For instance, investors look forward to halvings as such events have a positive impact on Bitcoin’s price. That’s because a halving event reduces the number of new Bitcoins generated, and thus if the supply is reduced while the demand continues to rise, the price will inevitably increase.
For miners, halving means a reduction in their rewards. As a result, many miners may shut down their operations if the rewards they earn cannot offset the cost of mining.
History has shown that mining events can significantly boost Bitcoin’s prices. For instance, after 2020 halving, Bitcoin’s price shot up by 40% in just a few weeks that followed. It grew three times its previous all-time high and reached $67,000 later in 2021.
Bitcoin is coded such that a halving event occurs when a certain number of blocks are created. While no one can accurately predict the event, experts believe the next halving event will fall anywhere between April and May 2024. That will be approximately four years from the previous halving event.
Bitcoin halvings cause violent swings in the price of Bitcoin, making it highly volatile during the weeks leading up to and after the event. A few months post the halving, Bitcoin’s price has generally seen a significant boost.
It is estimated that the halving process will continue till 2140. While it is tricky to determine the exact dates of halving as it occurs when the Bitcoin algorithm reaches a certain “block height.” Historically, halving events have occurred after 210,000 blocks, which has roughly been around every four years. Here’s an approximate estimate of the next 5 consecutive halving events post-2024:
| Halving Year | Estimated Date |
| 2028 halving | April 10, 2028 |
| 2032 halving | April 14, 2032 |
| 2036 halving | April 18, 2036 |
| 2040 halving | April 21, 2040 |
| 2044 halving | April 25, 2044 |
As of now, over 89% of the total 21 million Bitcoins have already been mined. Approximately 900 new coins are mined and added to the circulation every day. With the Bitcoin ETF on the brink of SEC’s approval, the 2024 Bitcoin halving is expected to bring significant movement in the Bitcoin economy.
Having said that, if we look at the historical data, Bitcoin’s price has significantly bumped in the weeks followed by the halving. The 2024 halving will be no different. Speculators believe Bitcoin’s price could surpass its previous high of $68,000 by mid-2024.
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Fundamentally, a Bitcoin halving event reduces the currency's supply. Continuous demand causes its price to rise after each halving. Thus, previous halving events have suggested that Bitcoin's price will increase significantly.
Once the last remaining Bitcoins are mined, there won’t be any more halvings. Miners will no longer get newly minted coins as block rewards. Instead, miners will be rewarded for validating transactions through the fees paid by users.
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