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Why do you keep hearing about this date people are calling bitcoin halving? What is so special about bitcoin halving?
Today we will explain what exactly happens on these bitcoin halving dates and how it affects the price of bitcoin.
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Anything that is scarce tends to have some sort of value. Bitcoin is built around that very idea. There will only ever be 21 million bitcoins. By definition, bitcoin will have a finite supply. This is one of the reasons why there is so much demand for bitcoin.
If you are familiar with bitcoin, you will know that bitcoins have to be mined. Bitcoin mining is the process by which new bitcoins are entered into circulation, but it is also a critical component of the maintenance and development of the blockchain ledger. It is performed using very sophisticated computers that solve extremely complex computational math problems.
Mining bitcoin was once extremely lucrative. But to mine bitcoin today, you will need a serious investment. In simple terms, mining bitcoin involves packaging 1 megabyte’s worth of transactions into a block. After doing so you collect the transaction fee; an associated “block reward” is unlocked with every new block. Block rewards started out at 50 BTC per block. That today is an insane amount of money. Life changing money.
For every 210,000 blocks (roughly every 4 years) that are created, the block reward gets cut in half. This is what people refer to as “The Halvening” or “Halving.” To break it down for you, essentially, the reward you are getting for doing the same amount of work is cut in half.
On November 28, 2012 the block reward was cut to 25 BTC per block. On July 9, 2016 the block reward was cut in half again to 12.5 BTC. And most recently on May 11, 2020 the latest halving of the block reward took place. Today the block reward is 6.25 BTC. The next halving will occur sometime in spring of 2024, when the block reward will be reduced to 3.125. And the next one is expected to be in 2028.
Mining bitcoin is not cheap. Miners use an insane amount of electricity to mine a single bitcoin. With the reward of mining a single bitcoin decreasing every four years you can imagine that some miners can be a little discouraged. But at the end of the day the only way the math makes sense for the miners is for the price of Bitcoin to go up. So as the price continues to go up, miners will continue to mine.
Halving cycles tend to have an effect on the price of bitcoin. In previous examples, when approaching the halving date and immediately following the halving date, the price of bitcoin has experienced a bullish trend. To no surprise, these bull runs have been followed by crashes. The crashes are followed by long “crypto winters” where belief isn’t as high and major news networks no longer report on Bitcoin. The next halving cycle then starts the process again.
Anything that is scarce tends to have some sort of value. Bitcoin is built around that very idea. There will only ever be 21 million bitcoins. By definition, bitcoin will have a finite supply. This is one of the reasons why there is so much demand for bitcoin.
If you are familiar with bitcoin, you will know that bitcoins have to be mined. Bitcoin mining is the process by which new bitcoins are entered into circulation, but it is also a critical component of the maintenance and development of the blockchain ledger. It is performed using very sophisticated computers that solve extremely complex computational math problems.
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