In April 2024, the crypto industry will witness one important event: the Bitcoin halving. But what kind of event is it and why is it so often discussed? Keep reading our article to find the answer to these questions.
What is Bitcoin halving and why it matters
Bitcoin halving is a fundamental mechanism built into the operation of Bitcoin, occurring approximately every four years. This mechanism reduces the reward for mining new Bitcoins by half. In 2024, the mining reward will decrease from 6.25 bitcoins per block to 3.125 bitcoins. The main purpose of halving is to control inflation and gradually reduce the number of new Bitcoins issued, making Bitcoin a deflationary asset with a limited supply. As the number of new coins decreases, a scarcity effect is created, which can theoretically increase the value of Bitcoin.
How many Bitcoin halvings have already happened?
Since the creation of Bitcoin in 2009, there have been only three halvings:
After the First Halving in 2012: The block reward was reduced from 50 to 25 Bitcoins. Following this event, there was a notable increase in the price of Bitcoin, which rose from $12 to over $1,000 in 2013.
After the Second Halving in 2016: The block reward was reduced from 25 to 12.5 Bitcoins. This event also led to a significant price increase, although the rise was more gradual compared to the first halving. Bitcoin’s price was around $650 at the time of the halving and reached nearly $20,000 in 2017.
After the Third Halving in 2020: The block reward was reduced to 6.25 Bitcoins. At the time of this halving, Bitcoin's price was approximately $8,000. The period following this halving saw considerable market enthusiasm, with Bitcoin's price reaching new highs. By the end of 2021, Bitcoin’s price increased by about 8 times.
It is important to note that although halving tends to reduce the rate of new Bitcoin creation, which leads to the expected price increase, it is not the only factor that affects the price of Bitcoin. Global economic conditions, regulatory changes, technological advances, and investor sentiment all play a crucial role in determining Bitcoin's price behavior.