“Transaction fees will likely grow in an inverse correlation to, and as a compensation for, the diminishing mining returns,” Ben Zhou, CEO of crypto exchange ByBit, told Decrypt. To understand the Bitcoin halving, we must first understand the theory behind its supply. The somewhat predictable nature of Bitcoin halvings was designed so that it’s not a major shock to the network, experts say. Bitcoin halving is when the reward for Bitcoin mining is cut in half. Over the past two decades, he’s reported on energy, cannabis, mining, agriculture and commercial fishing from the Americas, Europe and Asia.

The bitcoin protocol periodically reduces the number of new coins earned by miners in a process called halving. Because a halving reduces the number of new Bitcoins introduced, demand for new Bitcoins generally increases. This can be noted by looking at Bitcoin’s price after each previous halving event—it has typically risen.

Fiat currencies initially were created with firm rules—to create one dollar, the U.S. government needed to have in reserve a certain amount of gold. The inventor of Bitcoin, Satoshi Nakamoto, believed that scarcity could create value where there was automation consulting bain and company none before. After all, there’s only one Mona Lisa, only so many Picassos, a limited supply of gold on Earth.

Every four years, the amount of Bitcoin awarded to miners is halved, an event known as the Bitcoin halving.

1. That means transaction fees currently make up as little as 14% of a miner’s revenue—but in 2140, that’ll shoot up to 100%.
2. Bitcoin halving is when the reward for bitcoin mining is cut in half.
3. This can be noted by looking at Bitcoin’s price after each previous halving event—it has typically risen.
4. Higher prices would be an incentive for miners to keep processing Bitcoin transactions.
5. But then Bitcoin’s price shot up to its then-all-time high of over $20,000 by the end of the year, an increase of 2,916%.

Richard Baker, CEO of miner and blockchain services provider TAAL Distributed Information Technologies, says investors should be cautious about the next Bitcoin halving. “While the halving reduces the reward for miners, it equally lowers the supply of new coins without reducing the demand, notes Patricia Trompeter, CEO of cryptocurrency miner Sphere 3D Corp. The halving policy was written into Bitcoin’s mining algorithm to counteract how to buy bitcoin with cash in the uk 2021 inflation by maintaining scarcity. In theory, the reduction in the pace of Bitcoin issuance means that the price will increase if demand remains the same. Higher prices would be an incentive for miners to keep processing bitcoin transactions. On the other hand, while the halving reduces the reward for miners, it equally lowers the supply of new coins without reducing the demand, notes Patricia Trompeter, CEO of cryptocurrency miner Sphere 3D Corp.

Effects of Bitcoin halving

The debate over whether Bitcoin halvings affect the cryptocurrency’s price, or whether they’re already “priced in,” continues to rage. If a person, group, or government is trusted to set up the money supply, they must also be trusted to not mess with it. Bitcoin is supposed to be decentralized and trustless—no one in control, and no one to trust. Since Bitcoin is not controlled by any one person or group, there must be strict rules about how much Bitcoin is created and how it’s released. Since then, over 93% of the total supply has been mined and only about 1.44 million more Bitcoin will ever be created. The idea of limiting Bitcoin’s supply stands in marked opposition to how fiat currencies such as the U.S. dollar work.

The future price of bitcoin is likely to continue fluctuating as cryptocurrency value can be volatile and speculative as an investment instrument. In the short term, investor interest remains high thanks in part to the introduction of Bitcoin spot ETFs in January 2024. With the cryptocurrency ETFs, it became easier for investors to gain exposure to bitcoin’s price movements through regulated financial products. The cycle of mining and halving continues, with the next halving event anticipated after another 210,000 blocks are mined.

How Many Bitcoin Halvings Are Left?

Market sentiment typically becomes bullish in the lead-up to a halving, influencing trader behavior. At that point, there will be 21 million BTC in circulation and no more coins will be created. Presently, more than 19 million bitcoins have already been mined, leaving under 2 million left to be created.

Cryptocurrency

With the increased access and popularity of Bitcoin, the halving event of 2024 arguably received more public interest and media coverage than any prior halving event. However, the asset’s value jumped before the second halving in 2016. Similarly, in the year leading to the 2020 halving, bitcoin doubled in price. Currently, the asset’s value is approximately $34,500, and its behavior leading up to the next halving could differ from past trends due to other macro factors, including the approval of a spot bitcoin ETF. Meanwhile, JP Morgan analysts predicted a significant price correction following the halving, arguing that an increase in mining difficulty could push smaller miners out of operation. Mining difficulty is as much as 20% less than anticipated, they wrote—in turn, bringing down the production cost of mining.

After the first halving, it was 25, 12.5, and then 6.25 bitcoins on May 11, 2020. The reward was reduced to 3.125 when the latest halving occurred on April 19, 2024. Many investors have high expectations for halvings because, in the past, prices generally trended upward after the event. However, the trends historically moved slowly, over months and years until the next halving, and there is no guarantee that Bitcoin will follow the same trajectory. So, whether you invest in Bitcoin before, at, or after a halving depends on market conditions at the time, your outlook, and your risk tolerance level. The Bitcoin halving is intended to counter any inflationary effects on Bitcoin tips for writing clean c# code by lowering the reward amount and maintaining scarcity.

Gains made regarding market value might offer inflation protection for investors, but they don’t for the cryptocurrency’s intended use as a payment method. Bitcoin’s creator Satoshi Nakamoto built the concept of halving when creating Bitcoin. Nakamoto created halving because the supply was capped at 21 million tokens. The last bitcoin is expected to be mined by 2140, but it’s possible that the rewards will be reduced to satoshis (the smallest bitcoin unit) long before that. Similarly, in the wake of the 2020 halving, Bitcoin’s price increased from just over $9,000 to over $27,000 by the end of the year—but in the two months following the halving, the price didn’t break $10,000.