Bitcoin Halving: Understanding the Impact on Price and Mining

Bitcoin halving is an event where the reward for mining new BTC blocks is halved at regular intervals. The crypto rewards to miners are reduced by 50%, which also reduces the rate at which new BTC is released into circulation. This event occurs after every 210,000 blocks have been mined, which usually takes up to four years. Bitcoin halving will continue until 2140, and this 32nd halving event will make it hit its maximum supply.

The mining reward for each block was 50 BTC when Bitcoin was launched, and over 10.5 million BTC were mined within four years. The current mining reward is 6.25 BTC after three successful halving events. This event is one of the most vital tokenomics behind Bitcoin, as it helps to gradually release BTC into the crypto market while maintaining a maximum supply of 21 million. 19.41 million BTC had already been mined at the time of writing, leaving just 1.58 million BTC to be mined until 2140.

How does Bitcoin halving work?

The mechanism of Bitcoin halving is coded into its software and is not dependent on intermediaries, as the entire process happens automatically. Bitcoin transactions are stacked into blocks, and miners receive crypto rewards for validating transactions on its blockchain. The Bitcoin protocol automatically halves the mining rewards after 210,000 blocks are mined, which usually takes four years.

Does Bitcoin halving increase its price?

There is an ongoing debate about whether Bitcoin halving events affect its price. The reduced BTC supply should theoretically increase the demand for BTC and push its price up, according to the laws of supply and demand. Historically, BTC price has increased after previous halving events, but not immediately as other factors have affected its price. For example, Bitcoin's price was around $650 during the 2016 halving event. The BTC price remained constant and even dipped in the following months. The value of Bitcoin shot up to over $20,000 by the end of 2017. Similarly, in 2020, the price of BTC remained constant at around $9,000 following the halving event, but it shot up to $27,000 by the end of that year. Other factors influenced Bitcoin’s bull run in 2020, mainly due to reducing interest rates and increasing money flow.

When is the next Bitcoin halving?

The next Bitcoin halving event will occur in 2024 when the mining reward will be reduced to 3.125 BTC for each block mined.

Conclusion

BTC halving events cut the rate at which BTC are released into circulation in half, and the rewards mechanism will continue till 2140 when it will hit its maximum supply of 21 million. In 2009, the reward for each block mined was 50 BTC. After the first halving event, the mining reward was reduced to 25 BTC, then 12.5 BTC, and 6.25 BTC as of May 2020.

So is Bitcoin halving good or bad? The BTC halving events are one of the vital economics that attracts investors to it. Fiat currencies are inflationary due to their unlimited supply, but Bitcoin is capped at a maximum supply, and halving events reduce its inflation rates. Bitcoin halving is considered a good economic action as it reduces its inflation rates, helping it to increase its value in the long run. However, there is a drawback to BTC halving events: they encourage users to hold onto their BTC holdings without spending in the hopes of a significant price rise. This is one of the reasons why Bitcoin is considered an investment and not a currency for transactions.

How to buy Bitcoin in India?

You can buy Bitcoin through ZebPay. Join the millions of traders already using the platform. Download the ZebPay App through the playstore or the App store and enjoy seamless crypto trading on the go.