Bitcoin Halving: What Is It and Why Is It Important?

In today’s blog post we’ll talk about bitcoin halving. We’ll answer some common questions such as:

  • What is bitcoin halving and why does it happen?
  • When will the next halving happen?
  • And, how does halving affects bitcoin’s price?

Ready to dive in?

What is bitcoin halving?

When Satoshi Nakamoto developed bitcoin’s protocol, he set the supply of bitcoins to be finite, contrary to fiat currencies, which have infinite supply. Nakamoto limited bitcoins to 21 million to keep inflation in check.

You probably know that new bitcoins are created as a reward for miners, every time they mine a bitcoin block. But what does that have to do with bitcoin halving?

You see, every four years on average, the reward for bitcoin miners is cut in half. That means that the number of bitcoin generated per block is set to decrease by 50% every 210,000 blocks.

Why does halving happen?

bitcoin halving miners

So, why did Satoshi Nakamoto set up halving in the first place? Well, it’s a matter of supply and demand. Let’s say that the number of bitcoins is infinite. Or that the miners are creating new coins too quickly.

In that case there would be so many bitcoins circulating and their value would be pretty low. So you can say that halving is an event that guarantees legitimate scarcity, and scarcity enhances value.

When will the next halving happen?

bitcoin halving bitcoinclock

The halving has happened twice so far. In November 2012, the first halving took place, while the second halving happened in 2016.

It’s estimated that the next halving will occur in May 2020. On the website BitcoinClock you can follow the countdown.

There will only ever be 64 halving events. Once all of them are completed, there will be no more halvings and bitcoin will reach the maximum supply.

How does halving affects bitcoin price?

Logically, the question that pops up is how this affects bitcoin price? Most of the people within the crypto community think that bitcoin halving will lead to a price boost. And there is a reason for that. Previous halvings have triggered bull runs.

In fact, history shows us that bitcoin starts its new bull run at least a year before halving.

Bitcoin’s first halving in 2012 led to a significant growth and a new bull cycle. The same goes for the second time halving happened.

Price growth happened before and after the halving. And expectation that halving will affect the price usually stimulates demand for bitcoin, which in return influences its price.

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Wrap-up

So, to recap. Halving is basically cutting the new bitcoin supply in half. It occurs once every 210,000 blocks, which is on average four years.

Although bitcoin’s price tends to increase before and after the halving happens, we can only speculate on how bitcoin could potentially behave in its third halving.

This halving will happen in May 2020, so don’t forget to countdown with the rest of the crypto community.

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