About Bitcoin halving

Bitcoin (BTC) is gaining fame on social media and various markets for a number of reasons. In addition to the surge in price and the large market investment of some global financial giants, this mainstream digital asset has also been covered by the media due to the Bitcoin halving event. What exactly is the Bitcoin halving and how does it work? Let’s explore answers to frequently asked questions about Bitcoin halving.

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What is the Bitcoin halving?

The Bitcoin halving is one of the most anticipated events in the cryptocurrency space. To help you deepen your understanding, let’s take a quick look at the process of acquiring this mainstream digital currency. Bitcoin mining is a process in which miners dig into the digital cave of Bitcoin and acquire BTC by using specialized mining equipment as a virtual tool.

Bitcoin miners must solve extremely complex mathematical equations in the network to complete the “blocks” added to the Bitcoin blockchain. A block is a file that stores or retains 1 MB of Bitcoin transactions. As more and more transactions are verified, the size of the Bitcoin network gradually increases.

After solving these puzzles or successfully validating a transaction (which usually takes 10 minutes), miners are rewarded with bitcoins. During the Bitcoin halving process, the reward miners receive is halved every 210,000 blocks (roughly every four years) mined.

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How does the Bitcoin halving work?

Bitcoin halving happens every 210,000 blocks are mined. In the early days of Bitcoin, miners were awarded 50 BTC for every block they verified. In 2012, as the number of Bitcoins mined increased, the 50 BTC reward was halved, and miners received 25 BTC for each block mined. In 2016, after the second set of 210,000 blocks was mined, the reward was halved again to 12.5 BTC. The most recent Bitcoin halving took place in May 2020, when the third set of 210,000 blocks was mined and the reward halved again, now at 6.25 BTC per block.

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How will the Bitcoin halving affect the price of BTC?

Bitcoin halving has different effects on its price. Here’s how previous halvings have affected the Bitcoin market price.

First Halving (2012)

The first Bitcoin Halving took place on November 28, 2012. After the first set of 210,000 blocks were mined, the reward per block was reduced from 50 BTC to 25 BTC. Before the halving, bitcoins were sold at $12 per bitcoin. A year later, it was on the market for more than $960.

Second Halving (2016)

The second halving happened when 420,000 blocks were mined. On July 9, 2016, Bitcoin miners were rewarded with 12.5 BTC per block. Before the second halving, Bitcoin was selling at around $665, and a year later, its price soared to $2,550.

Third Halving (2020)

The 2020 Bitcoin halving took place on May 11. When the third set of 210,000 blocks was mined, the miner’s reward was halved again to 6.25 BTC per block. On the last day of 2020, Bitcoin’s selling price surged to over $29,000 (last year’s high).

Fourth Halving (2024)

The next Bitcoin halving is expected to occur in 2024, after 840,000 mined blocks have been mined. At that time, miners will receive a reward of 3.125 BTC for each block.

This process will continue until all 21 million BTC have been mined, which some cryptocurrency enthusiasts say will continue until 2140. But who knows?

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Why is the Bitcoin halving happening?

After learning about how the Bitcoin halving works, you might be thinking: “Doesn’t that seem fair to miners working hard in Bitcoin’s digital cave?” If you’re a Bitcoin fanatic and user, you may already know that Bitcoin’s mysterious anonymous developer, Satoshi Nakamoto, set a supply cap of 21 million for Bitcoin when he created it.

At the time of writing, 88.83% of the total BTC supply has been produced. That said, there are only 2.3 million BTC left to mine. However, not all of the 18.6 million BTC that has been mined is necessarily circulating in today’s market. In fact, a New York Times report mentioned that about 20% or billions of dollars worth of bitcoins are held in wallets that have been lost or cannot be opened .

When all 21 million bitcoins are mined, miners will no longer receive block rewards and will only be able to earn fees from each transaction they confirm. Although the miner’s reward decreases with the Bitcoin halving, at the same time Bitcoin becomes more scarce due to the limited supply, and the unit price of Bitcoin continues to soar over time. The surge in Bitcoin’s price also motivated miners to keep mining.

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What is the impact of the Bitcoin halving?

The Bitcoin halving has many effects, from Bitcoin’s market price to miner rewards to traders’ perceptions of market movements. Below are some notable positive and negative impacts.

For miners

Bitcoin mining is considered to be one of the most efficient ways to obtain a first-hand Bitcoin. But from another perspective, mining operations can have very high operating costs, depending on whether you mine alone or join a mining pool. Either way, you need high-performance mining equipment and professional software to go through a tedious and expensive process to acquire bitcoins. For some miners, a sharp drop in mining rewards could lead to lower profits. Since they put a lot of money into powerful mining rigs, the reduced block reward may not cover their mining operations. It is important to note, however, that due to Bitcoin’s high volatility, not every miner faces the same situation.

For traders

Some miners may not like the Bitcoin halving as soon as possible, but Bitcoin enthusiasts, traders and investors are all looking forward to the halving. why? This is because, during this period in the cryptocurrency space, the amount of money miners are generating has decreased. That is, if the market demand increases and there is a limited amount of bitcoin available, this paves the way for a surge in bitcoin price. The higher demand and limited supply of Bitcoin can lead to more market opportunities for traders to sell at higher prices. While we’ve seen this price trend from the first to the most recent Bitcoin halving, it’s important to keep in mind that this highly volatile asset can appreciate or depreciate quickly, depending on market movements.

For Bitcoin price

We mentioned earlier that Bitcoin’s halving could push its market price higher. However, this won’t always happen, and we’re not entirely sure how high its price will be. High prices may occur days, months, or years after the halving, and price declines may also occur in the meantime. Also, will there be more outsiders interested in cryptocurrencies after the halving? Will there be another bull market? Will there be new traders in the market? These are just some of the questions that come to mind, but then again, we’ll just have to wait and see how Bitcoin’s price develops.

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Can You Earn Extra Cash From Bitcoin Halving?

Bitcoin is known for its wild swings in price. So it is possible to make money? If you are interested in cryptocurrency trading, try watching Bitcoin price movements over a week or month to decide when is the best time to buy or sell.

Just always remember that before engaging in any trading activity, you need a reliable cryptocurrency wallet and platform. If you want to try bitcoin trading, you can create an account on Paxful and start trading. You’ll also get a free bitcoin wallet to manage and track your money anytime, anywhere, easy, right?

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Is Bitcoin Halving Good or Bad?

From what we have discussed above, we know that Bitcoin halving will have different effects on its market price, miners, traders, and investors, both positive and negative. The price of Bitcoin, like other assets and precious commodities, is determined by supply and demand. However, for miners whose reward is halved roughly every four years, mining may not be as attractive as it was before the halving (50 BTC per block reward).

However, more than a decade after Bitcoin’s inception, its increasing popularity and worldwide adoption have undoubtedly pushed its price even higher. So is halving good or bad? We put the answer in your hands.