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- Unlocking the Secrets of the Bitcoin Halving
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Hey everyone,
With the countdown to the Bitcoin halving ongoing— its expected to occur on April 19th —it's time to do a quick breakdown on what it is and why it matters.
How Bitcoin supply changes over time
The supply of Bitcoin is increasing over time. New Bitcoin are created to pay Bitcoin miners to process transactions. These payments are called “Block Rewards” and they are paid in a set number of Bitcoin.
The Bitcoin supply doesn’t increase indefinitely though since there is an ultimate cap of 21 million that can ever exist.
So how does the increase in Bitcoin eventually slow / stop? Enter the Bitcoin Halving.
What's the Bitcoin Halving?
Roughly every four years (more specifically 210,000 blocks), something called the Bitcoin halving happens. The halving is when the Block Reward paid to miners is cut in half.
The halving results in the daily increase in Bitcoin slowing down more and more over time. We can see that in the chart below.
Graph of Bitcoin supply over time
How Does the Bitcion Halving Affect Prices?
Time to dust off the ol’ textbooks…it all comes down to supply and demand. The Bitcoin halving impacts the supply side of the equation.
Supply
Since the Bitcoin Halving cuts the Block Reward in half, it slows the pace that new Bitcoin are created - Less new supply each day pressures prices up.
How does this tie into the big Bitcoin bull market every 4 years?
These big Bitcoin bull runs happen roughly every 4 years because both the halving (supply squeeze) and liquidity cycle upturn (more demand) tend to convene.
Now just because the halving is coming up doesn’t necessarily mean that markets will rally right when the halving happens. Markets are very good at anticipating events and pricing them in before they happen.
So what about the next halving?
The next halving is forecast to happen on April 19th…a little less than a week away!
There are currently ~900 new Bitcoin are added per day to pay miners
After the halving the fee will be cut in half: Only 450 new Bitcoin will be added per day to pay the miners
For people who want to follow along, a countdown timer to the halving can be found here. For real time updates on when the halving is complete we’d recommend checking out X / Twitter.
Cheers,
Justin
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