The “halvening”, or Bitcoin block reward halving, is somewhat of a holiday in cryptocurrency circles. This event happens every 210,000 blocks or about every 4 years. It has only happened twice since Bitcoin’s inception, 2012 and 2016.
What is the Halvening?
To understand the halvening, you need to understand what the block reward is.
When miners add a block to the Bitcoin network, new Bitcoins are created and given as a reward.
There is a set reward per block mined. This is referred to as the block reward. The reward per block is currently 12.5 BTC. The 2020 block halving will drop it to 6.25 BTC per block. It dropped from 50 to 25 in 2012. It halved from 25 to 12.5 in 2016.
So the halving simply cuts the block reward in half. Pretty simple.
Bitcoin will undergo a total of 33 halving events before all coins are mined. Bitcoin is expected to reach its max supply of 21 million coins in 2140. More than 98% will be mined by 2030.
About 1800 Bitcoins are generated per day and 86.04% of Bitcoins have already been mined. The halving event will make it so about 900 Bitcoins are created per day.
After the last Bitcoin has been mined, miners will reap rewards solely from transaction fees. The number of transactions contained in a block usually range from about 1400 to 2700.
These halvenings are used to control the emission of Bitcoin and to control inflation.
Bitcoin Halving Implications
There has been a significant price run-up after the past two havings and many are expecting this to kick off the next bull run. Not everyone shares this sentiment, but many believe the price will increase significantly after this event.
Let’s look at the past halvenings. 150 days after the 2012 halving, BTC was 928% higher. The following year saw an increase of about 9540% from the halving date. Reaching a new all time high. It was later followed by a sharp 86% drop in price. After the decline, it had a rocky climb upwards until the next halving.
A similar cycle happened during the 2016 halving. 150 days from the halving, BTC rose 17%. Later on, another bull run kicked off until Bitcoin reached a new high. It neared $20,000 in price, having climbed about 2911% since the halving date. Again, Bitcoin took a fall, losing about 84% of its market value from the new all time high.
If history repeats itself, we could be in the accumulation stage. This would be marked by a steady increase at first, with sharp gains about a year or so after halving. It would reach a new all time high and crash afterward. This is if Bitcoin takes the same path it has before, but not everyone agrees. Some argue that the market is a different beast now. Only time will tell. Market predictions and expectations can often be a self-fulfilling prophecy.
Regardless, you can probably expect higher volatility in the crypto market around the time of the halving.
Miners can expect to make less money from mining. Profits won’t necessarily get cut in half for miners, they may sell the BTC they mine at a higher cost, to offset profit loss. The hashrate of Bitcoin may also fall temporarily as some miners drop out of the hashing race.
Block Reward Halving and Other Coins
Block reward halvings are a mechanism to control the supply and inflation rate of cryptocurrency. This mechanism is not exclusive to Bitcoin.
Bitcoin Cash (BCH) will experience its first halving event about a month before Bitcoin (BTC).
The LTC halving also occurs about every four years, with 2019 seeing the most recent one.
Monero doesn’t have a halving event; instead, each block has a slightly lower reward than the previous block. This will continue until about May 2022. After that, the emission will stay fixed at 0.6 XMR per block. This will continue to run infinitely as there is no XMR supply cap. Hard forks, like MoneroV, have implemented a max supply.
The Ethereum block reward has decreased a few times as a result of several network upgrades. It is currently 2 ETH.
Dash block reward decreases by 7.14% about every 383 days.
Namecoin also halves every four years.
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