Recently, more and more information has emerged indicating that the cryptocurrency’s price has increased after halving; however, given that not everyone clearly understands the essence of this process, you should spend more time getting to know it.
“Why do we need to halve at all?” a natural question might be.
This instrument is primarily used to control monetary inflation. The main advantage of bitcoin over fiat money is that the number of coins is initially known, while traditional money, if necessary, can be printed indefinitely. The total number of coins is 21 million, with 87% mined so far.
What Is Halving
Viktor Dorokhov, the expert of the Digital Economy program at the IMEB RUDN University, explains that not all cryptocurrencies are deflationary in their economic model. But the very first cryptocurrency in the world – Bitcoin – is just that. This is possible through halving.
The main cryptocurrency’s program code contains a mechanism that reduces the reward for every 210 thousand blocks added to the network, i.e. confirmed transactions. As a result, halving occurs every four years. At the same time, the total number of Bitcoins that can be issued is limited to 21 million, with the last coin mined in 2140.
Of course, halving is an extremely effective mechanism for a deflationary economy, therefore, for maintaining and increasing the value of the underlying asset: despite the high volatility, since its inception and the generation of the first block in 2009, Bitcoin only grew literally from zero to more than $ 61.7 thousand. in the moment.
Why Do You Need Halving?
A system-planned decrease in profitability for the production of a new block is referred to as halving. According to Martin Petkov, an analyst at Storm Gain, a platform for trading, buying, and storing cryptocurrency, this feature helps to reduce coin inflation caused by excessive mining. Because halving is usually followed by an increase in the value of the cryptocurrency, traders and investors keep track of the alleged event date for purchases. So, the Bitcoin halving held on May 11, 2020, reduced the reward for the mined block from 12.5 BTC to 6.25 BTC, after which the price of the coin increased from $ 9 thousand to $ 30 thousand by the end of the year.
Each network has its own rules about the period of decline in profitability. For example, in Bitcoin, halving occurs every 210,000 blocks, and the next one is expected in May 2024, as mentioned above.
Concerning the frequency of halving bitcoin, the cryptocurrency’s code states that the reward will be halved every 210 thousand blocks.
Because it takes about ten minutes to generate one block, halving occurs once every four years, and the last, the third halving in the history of bitcoin, took place in May 2020. It is worth noting that the price of bitcoin was $ 12 at the time of the first halving in 2012, while it reached $ 650 and $ 8,700 during the second and third halvings, respectively.
The fact that the generation of bitcoin is halved, and the demand remains at the same level, allows us to expect that the price of the cryptocurrency should increase. Many people are hoping for another native after the halving, but the rate is rising solely because of this belief, not because of actual demand.
Bitcoin Mining And Cost Forecast
As Sergey Arestov, a co-founder of BitCluster, explains, Bitcoin halving – halving the reward for a block – occurs every 4 years or every 210,000 blocks.
Bitcoin has already undergone three halvings in its history.
Before the halving in 2012, miners received 50 BTC per block mined, after which the reward was reduced to 25 BTC. After the halving in 2016, the reward dropped to 12.5 BTC. On May 11, 2020, the issue per mined block was 6.25 BTC + transaction fee. Now it is about 0.75 BTC
Since bitcoin is a deflationary payment system, and less and less of it is mined every day, its value is growing higher and higher. The last bitcoin remains will be obtained in 2140.
For a reward, you can continue work at transactions – transaction fee.
According to the creator’s vision, by this time, the entire world will be using bitcoin, and 1 bitcoin could cost more than a billion dollars, with a significant reward for the commission in the block.
Therefore, miners will continue to solve the mathematical problem of choosing the correct hash to close the block of transactions and receive their reward. As a result, miners will chill in a fierce battle for the mined block.
Where to watch when the next halving
The expected date of the next halving is May 5, 2024, as noted by Victor Dorokhov, expert of the Digital Economy program at the IMEB RUDN University
- Check out when the next halving is available on Academy Binance.
- You can also keep track of the countdown on one of the most popular cryptocurrency tracking websites, Digitalcoinprice.
According to Martin Petkov, the most convenient site with a countdown to the new halving is Coingecko. All coins are available on it, and you can quickly switch between them. For example, changing the end of the bitcoin halving line to bch halving or Zcash halving.