Your questions about the Bitcoin halving answered

The Bitcoin halving happens roughly every four years, with the next one expected around 21 April this year. The first halving was followed by price increases of more than 8,000% at the top of the cycle. Bitcoin’s value also increased roughly 3,000% at the peak of the second halving cycle in 2016, and the last halving in 2020 was followed by a bull run that topped out at an all-time high price of around $69,000.

While price history is never an indication of future price movements, investors often credit the halving event as one of the main drivers of Bitcoin’s market movements. Here’s what you need to know.

Why does the Bitcoin halving happen? 

The creator(s) of Bitcoin capped its total supply at 21 million to counter the inflationary impact of unlimited money printing on the value of a currency. Bitcoin will be released at a predetermined cadence until it hits this number in roughly 2140. 

In theory, if demand for Bitcoin increases while the supply remains constant and predictable, the laws of supply and demand mean that the purchasing power of Bitcoin should theoretically continue rising. If demand falls, the prices will fall. 

How does the halving work? 

New Bitcoin are created every time a transaction is verified on the Bitcoin blockchain. This mechanism is used to reward miners that verify, or ‘mine’, these transactions. Every day close to a thousand Bitcoin is released into the circulation as rewards for miners. 

The Bitcoin halving sees the amount of Bitcoin paid to miners for every block they mine cut in half. So, every four years until the 21 million cap is reached, the number of Bitcoin released into the system falls 50%. From then on, miners will be paid through transaction fees. 

How is the date for the next halving decided? 

The Bitcoin halving occurs every 210,000 blocks mined. Bitcoin is designed to automatically adjust the difficulty of mining new blocks in response to how many miners are active on the network. The reasoning behind this is to ensure that new blocks are added to the chain at a constant rate of one block every 10 minutes. This means it’s impossible to pinpoint an exact date for the next halving event, but at current rates it’s expected to happen around the end of April 2024.

How many Bitcoins will be rewarded after the next halving? 

Miners originally received 50 BTC for every block of transactions they verified. This was cut to 25 BTC in 2012, 12.5 in 2016 and 6.25 BTC in 2020. The halving in 2024 will see rewards cut to 3.125. 

Quick math 

• Roughly 114 blocks are added to the blockchain every day
• Meaning that 900 BTC are mined every day
• After the halving, there will be an estimated 450 new BTC released into circulation every day.

Will the price of Bitcoin definitely go up after the halving?

No. There are many analysts who believe that the halving has actually had a minimal impact on Bitcoin’s previous bull runs, but even if you accept the idea that it is a primary driver of cyclical price movements then there is no guarantee that it will continue to do so in the future. Bitcoin is still a relatively new technology and financial asset. 

With the inflow of institutional investment and ETFs, the industry looks very different today to what it did five or ten years ago. And this cycle already looks very different to previous cycles, with Bitcoin testing all-time highs in close proximity to the halving for the first time in its history. 

How does the halving happen? 

The halving is written in the algorithm that runs the Bitcoin network. It’s essentially a change in the rules that govern the Bitcoin ecosystem that happens automatically when certain criteria is met. 

Does the halving affect my BTC? 

Apart from price fluctuations, the halving does not affect the amount and nature of BTC you own. 

When there’s no more new Bitcoin to pay miners, how will they be rewarded? 

After 21 million coins have been mined, miners will be rewarded with network fees. The busier the network, the more they will be paid for mining. 

Will it still make financial sense to mine Bitcoin if rewards are cut every four years? 

Yes. In theory, and as has been true in the past, price increases coupled with each halving balances out the losses from reward slashing. Mining technology has over the years become more efficient and cheaper to run, and this evolution is expected to continue in future, though there are also other financial considerations for miners such as energy costs that may impact its viability. 

*Investing in cryptocurrency may result in the loss of capital as the value can fluctuate. This information should not be construed as a solicitation to trade. All opinions, news, research, analysis, prices or other information is provided as general market commentary for information purposes only and is not investment advice or recommendation. Luno always advises you to obtain your own independent financial advice before investing or trading in cryptocurrency.