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What is Bitcoin halving and why is it essential?

There is no denying that Bitcoin has always taken the top spot among other cryptocurrencies. Ever since it was first released in 2009, it has risen through the ranks and is now worth hundreds of thousands depending on how much you have. 

To acquire Bitcoin, they have to be mined first. Along with this process, Bitcoin halving takes place to balance the coins in circulation and their price. It’s an essential process that occurs once every four years and allows for better crypto transactions moving forward. 

The more you know about this process, the better it will be for your personal investments. Learn more about Bitcoin halving and its importance in the coming sections: 

How does Bitcoin halving work? 

Bitcoin halving is the event wherein Bitcoin mining rewards are cut 50-50 to decrease the rate of inflation and raise the price of BTC over the course of a few months or even years. The process of maintaining the supply of Bitcoin would not be possible without Bitcoin halving, meaning to say, it works hand in hand with Bitcoin mining.

To put this into perspective, Bitcoin has a maximum supply of 21 million coins. Those that are not currently in circulation must be mined for investors to access them. The primary goal of Bitcoin halving is to delay the depletion of Bitcoin reserves so that they will last longer. 

Bitcoin halving dates occur once every four years or ​​for every 210,000 blocks that are mined. The first of which happened in November 2012. This allows Bitcoin to solidify its position in the market and for the demand to rise as well. 

Back in 2012, Bitcoin had a price of $12 which has significantly increased thanks to the halving process that occurred in that year. By the end of 2013, Bitcoin price shot up to $1,150. The same phenomenon happened every halving day with the prices increasing by a large margin. 

The last halving event was in May 2020 and saw Bitcoin go up from $8,787 to a record-breaking $64,507. As for future Bitcoin halving dates, the next one is expected to occur in 2024. 

Based on estimation, the last Bitcoin halving date will happen in 2140 when the reserves of the cryptocurrency will officially be depleted. When this happens, all BTC coins will be in circulation and can be accessible by anyone as long as they are capable of owning crypto. 

To learn more about why Bitcoin halving is important, check out the section below: 

Why Bitcoin halving is essential 

There are still many crypto investors who don’t know about Bitcoin halving and just how important it is to regulate stocks. Learning about the basics and getting ready for this once in a blue moon event is necessary for all avid investors. 

For more information, check out some of the reasons why Bitcoin halving is essential to the crypto industry: 

Bitcoin halving manages inflation in the crypto market 

When it comes to cryptocurrency, inflation can mean the downfall of a digital currency. Inflation is the decrease in the purchasing power for a currency, which is Bitcoin in this case.

To control the inflation of BTC tokens, the halving process will significantly increase the value of BTC by making the coins more difficult to acquire. Miners will have to work harder and only get 50% of the rewards after Bitcoin halving.

Every halving event, the value of Bitcoin experiences a bullish movement. This can be observed in its current inflation rate of 1.76% which is a significant drop from the previous 4-5% rate in 2016. Going further down the line, the inflation rate of BTC in 2011 which was 50% significantly dropped to 12% after the first Bitcoin halving day in 2012.

Bitcoin halving controls the supply of BTC in the market 

As previously mentioned, Bitcoin has a total supply of 21 million and over 83% of this is already in circulation. To prevent exhausting all of its reserves, the halving process manages the supply of BTC by decreasing the number of coins rewarded to miners. 

A diminished block reward for Bitcoin miners will, in turn, decrease the revenue they can get from verifying transactions in the blockchain. When a lot of miners find it difficult to remain competitive in the market, less BTC will be mined in such a short span of time.

Bitcoin halving is able to increase the price and demand of BTC 

The concept behind this is simple: the law of supply and demand. The basic premise of this economic model is the interaction between the price of a resource and the willingness of people to either buy or sell it. In terms of cryptocurrency, it means that the fewer BTC that are being mined, the more it gives value to the coins already in circulation. 

Miners can take advantage of Bitcoin halving 

While the Bitcoin halving process will certainly prove beneficial for investors and their own BTC stock, it will also serve as a great opportunity for miners. Mining after halving day means that it will be more difficult to mine BTC, but it can be an excellent investment when the price of the coin spikes again in the future. Profits can be multiplied by a lot depending on the market performance. 

Make the most of your crypto investments! 

In summary, Bitcoin halving occurs to bring balance to the market and make transactions convenient for crypto users. Therefore, understanding the Bitcoin halving meaning and how it works is essential to making better decisions in crypto investments. 

Bitcoin halving and mining are just some of the things you’ll have to familiarize yourself with before being a seasoned crypto investor. Luckily, you can learn more about all things crypto when you browse through Cryptoshimbun. Make the first step to further your knowledge in cryptocurrency and take your investments to the next level! 

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