What is Bitcoin Halving?

It is a decrease in the rewards Bitcoin miners earn for their work. Approximately every four years, Bitcoin is halved. Each one reduces the amount of Bitcoin miners’ block rewards by half, as the name implies. It causes Bitcoin to only distribute in half. Just 21 million will ever be produced, as per its founding rules, to begin with. With Bitcoin halving, the rate at which Bitcoin creates reduces to avoid more Bitcoin creation than there is demand for. The Bitcoin halving also helps to prevent inflation. Because they lower the number of new bitcoins the network creates, bitcoin halvings are significant for traders. Price increases could occur if demand is consistently high because there is a limited quantity of new coins. Even while this has already happened before and after other halvings, increasing the price of bitcoin, each halving has its own particular set of circumstances, and demand for bitcoin can fluctuate significantly.

Bitcoin Halving Events History

Pre-Halving

Santoshi Nakamoto, the person who created Bitcoin on January 03, 2009, mined the first block known as a Genesis block. Initially, the Bitcoin reward was set to 50 BTC by him. Bitcoin held no monetary value, so no one invested much in mining. However, an unexpected increase was experienced in Bitcoin mining in 2011, where the value surpassed $0 to $1.

2012

The first ever Bitcoin halving event occurred on November 28, 2012. At first, there was no visible change in the value of Bitcoin, but later, at the beginning of 2013, its value initiated to increase. The value of Bitcoin reached $1,100, known as a remarkable rise of all time in Bitcoin’s value.

2016

The second Bitcoin halving event took place on July 09, 2016. Since there was no significant change in the value, but then in mid-June, Bitcoin made a comeback. However, the price also dropped shortly after the actual halving. There was a prompt transition in the value of Bitcoin that reached an all-time high at $19,700 on December 17. 2017.

2020

The last Bitcoin halving event occurred on May 11, 2020, and there was no instant change in its price value. Dye to covid outbreak, a decrease in the price value of Bitcoin was seen in March. And then, by 2021, there was a significant rise in the price of Bitcoin, which was $69,000.

Bitcoin Halving Chart (Source: CoinWarz)

How To Be Prepared for Bitcoin Halving as an Investor or Trader?

The Investor or Trader must be prepared before Bitcoin Halving to avoid potential risks. There are a few ways through which investors can do for the preparation:

Investment Techniques

It is essential that investors pre-plan their investment techniques. The strategic decision with a full-fledged plan can help them with the crypto investment. If the traders strategically work in this case, it will reduce the chances of potential risks encountered. The crypto market involves enormous fluctuation; hence the investors must prepare themselves by making strategic investment decisions for saving their assets.

Crypto Portfolio Diversification

When investors think about diversifying their cryptocurrency portfolio by purchasing alternative digital assets that support their goals, any potential losses in the Bitcoin market reduces if the investors diversify their portfolios.

Awareness and adaptation to Market dynamics

Awareness is the foremost factor to consider for crypto and any subject. Investors shall not invest anywhere just like that; they should be aware of the consequences, market trends, and fluctuations before investing in any digital asset. Once the investors know, they will prepare their action plans more efficiently. It will help the investors to adjust and adapt to the changes that occur accordingly.

Impact of Bitcoin Halving

Bitcoin Halving occurs as a part of the protocol introduced since its inception and to reduce the rate at which new Bitcoin produces. Bitcoin halving affects several areas and factors, which include:
Shortage and Limited supplies

The inventor of Bitcoin wanted to create a cryptocurrency with a limited and managed supply. This protocol leads to halving Bitcoin, which cuts the mining return rewards to half and decreases the value a new Bitcoin generates. The new collection of Bitcoin entering the market is half as compared to the past few years. Bitcoin halving ensures a limited supply that controls the rising scarcity over time.

Security and Hashrate

Bitcoin’s security solely depends on its security network and hash power. After Bitcoin halves, there is some reduction in the miner’s profitability, and it can cause the hash rate to decrease. The protocol established for Bitcoin is a saviour; hence, after Bitcoin halving, the block creation rate maintains consistency, ensuring the network’s security and the block creation rate improves.

Market Economics

Bitcoin halving has economic consequences for both miners and the marketplace. Potential miners discontinue the mining after the halving event. If the mining rewards reduce by half, miners would think before putting in the resources as paying for electricity, mining rigs, and hardware will cost them. It would reduce the miners’ profitability, creating a supply-demand market imbalance. Hence, the market economy will be affected.

Inflation

As the mining rewards decrease to half, the new supply entering the market reduces the production of new Bitcoins. It leads the inflation rate to fall as it has evidently over the past few years after the Bitcoin halving event. Hence, Bitcoin’s halving keeps the coin secure and profitable in the long run effectively.

Future Bitcoin Halving Event Prediction

The rate of new Bitcoin supply will steadily decline as Bitcoin halvings continue until the mining of all 21 million Bitcoins. The final portion of Bitcoin is said to be mined by the year 2140.
The next halving will occur after mining the 840,000th block since the previous halving and the precise date are also released. The next halving is said to occur on April 26, 2024, bringing the mining incentive for each block down to 3.125 BTC.

Bitcoin Halving Countdown (Source: Coinwarz)

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