When it launched in 2009, Bitcoin's total supply was set at 21 million. From that original amount, less than 7% of the total supply is yet to be mined.
At its inception, Satoshi Nakamoto envisioned a new form of global financial order, focusing on universality, privacy, and financial independence from government actors. As part of its design, the OG blockchain had several safeguards to govern a fair monetary system that can’t be hacked or gamed while staying nimble to global market changes.
The fixed amount of Bitcoin’s supply is the key to its success and lasting power as a leader in cryptocurrency assets. Eventually, Bitcoin miners will exhaust all available Bitcoins for mining, and the 21 million circulating supply will be a limited and valuable resource. The circulating supply has been reduced even further by an estimated 4M bitcoin that have been lost through the years.
In spring 2024, we are set to enter a new stage of Bitcoin - the Bitcoin halving. Let’s chat about what exactly happens during the Bitcoin halving and how you can prepare for this year’s exciting event.
As the first decentralized network, Bitcoin transactions are verified through digital mining in a process called “proof-of-work.” To read more about Bitcoin, visit our blog "Bitcoin: The 6 Properties of Money".
As BTC miners compete to mine network transactions (referred to as “blocks”), the network validates new transactions and oversees the issuance of new Bitcoin. This increases the market’s overall new circulating supply and amplifies Bitcoin's popularity.
As miners successfully add a block to the blockchain, these transactions get added to the blockchain and become immutable. To help sustainably manage the flow of new Bitcoins into the market, the mining reward decreases due to a process called the Bitcoin halving. Bitcoin halving, which reduces mining rewards by half, will continue until no new Bitcoin remains. It is anticipated that the block reward will not run out until the year 2140, to be exact!
Bitcoin’s Bitcoin core code includes halving as a fundamental feature, which happens approximately every four years or after mining 210,000 blocks. Each block takes, on average, 10 minutes to mine. The most recent halving event occurred in May 2020. The next halving cycle, expected to happen in April 2024, is anticipated to boost the popularity of Bitcoin and reignite interest in the crypto market once again.
While there is no specific date for the next halving event, analysts anticipate Bitcoin's next halving to occur in mid-April of 2024. The halving occurs at a specific block height, and each block takes approximately 10 minutes to mine on average, making it difficult to estimate the exact timeline of the halving. However, the closer we are to the actual event, the better estimates become - kind of like predicting the weather!
Like previously, analysts expect a rise in Bitcoin prices after the halving event. Historically, decreasing the mining reward prompts the price to increase since the new supply is less.
To better understand the upcoming Bitcoin halving, let’s take a look backward and reflect on previous major BTC blockchain halving events.
● January 3, 2009: Bitcoin launches and the first blocks are mined on regular laptops. The mining reward was 50 BTC, encouraging many people to explore this new cryptocurrency, even while the idea of cryptocurrency was in its infancy.
● November 2012: The first halving event occurred after the mining of 210,000 blocks. Any new blocks mined now had a reward of 25 BTC. In the year following the first halving, the price of Bitcoin increased from $12.35 to $127.00 USD.
● July 2016: After nearly four years, the halving cycle continued, and the mining reward halved again to 12.5 BTC. Similar to the previous halving, Bitcoin's price experienced a positive impact after the halving event. In the six months following the halving, the price of Bitcoin increased by a reported 40 percent.
● May 2020: The most recent halving in 2020 during the pandemic saw the mining reward drop to 6.25 BTC. The reduction in the supply of new Bitcoin resulted in a bull market and further price increases. Five months after the halving, Bitcoin increased from $8,821.42 to $10,943.00 USD.
Bitcoin halving is a crucial event in the world of cryptocurrency that has significant implications for the Bitcoin ecosystem and its participants. With each halving event, the supply of new Bitcoins decreases, leading to increased scarcity and a new era for the BTC blockchain. As we’ve seen in previous halving years, the anticipation of an upcoming halving can even be as significant as the event itself.
As far as crypto market events are concerned, the Bitcoin halving may been one of the most impactful events in our global market. Investors and enthusiasts need to stay informed as we approach the next halving, including the impacts of promoting BTC scarcity, long-term value and market volatility. By assessing the potential risks and opportunities, you can better navigate the evolving landscape of the cryptocurrency market.
Want to learn more about Bitcoin before the next halving event occurs? Check out our blog or join Newton today!
