Also known as the “halvening”, the Bitcoin halving occurs every 210,000 blocks, or roughly every 4 years. It cuts in half the amount of Bitcoin created by every new block assembled by a miner.
Blocks contain hundreds of transactions that transfer control of Bitcoin from one user to another. When a Bitcoin miner is able to assemble a new block with new transactions, they are rewarded with a “subsidy” of new Bitcoin. This reward is what gets cut in half.
No one’s existing Bitcoin is cut in half – only the future miner reward.
Why is the Bitcoin Halving Significant?
It is how Bitcoin’s unique monetary policy is enforced. Why is that important? Because Bitcoin’s monetary policy, or issuance policy, is unique, fixed and 100% predictable. Unlike other assets such as gold, real estate, stocks, bonds or government currencies, the amount of Bitcoin is hard capped. There will never be more than 21 million Bitcoin in existence.
If the demand for other assets increase, more will be created for sale in the market. By contrast, no amount of demand will change the issuance of Bitcoin. We know this with absolute certainty how much Bitcoin will exist in 1 year, 5 years and 50 years! How do we know this?
Code Enforces the Half-ing
The code of Bitcoin, which is run by thousands of computer nodes around the world, validates the rule that cuts in half the miner reward every 210,000 blocks. For you geeks, it looks like this:
The first part of the code divides the current block height by 210,000. If this number is less than 64, there will be a new halving. The second part of the code established the first mining subsidy of 50 Bitcoins and then cuts this amount by half for every subsequent 210,000 blocks.
In other words, after 50 has been divided 64 times, the last bitcoin will have been released into the market and the total 21 million supply will have been achieved. This is estimated to occur in the year 2140.
Unlike other assets, Bitcoin’s code makes it crystal clear that there will be a maximum number of bitcoin – and it is through this halving process that this is achieved.
Past Bitcoin Halvings
History shows a rapid price increase one year after every halving event.
- 1st Halving: November 28, 2012
- Rewards halved from 50 BTC to 25 BTC
- BTC Price = $12 USD
- Price 1 Year Later: $1,007
- 2nd Halving: July 9, 2016
- Rewards halved from 25 BTC to 12.5 BTC
- BTC Price = $680 USD
- Price 1 Year Later: $2,508
- 3rd Halving: May 11, 2020
- Rewards halved from 12.5 BTC to 6.25 BTC
- BTC Price = $8,590 USD
- Price 1 Year Later: $55,849
- 4th Halving: April 19, 2024
- Rewards halved from 6.25 BTC to 3.125 BTC
- BTC Price = $59,651 USD
- Price 1 Year Later: $85,063
As you can see, historically the halving has been a precursor to large gains in Bitcoin’s price!
This makes sense because the halving decreases the amount of new bitcoins generated per block. This means the supply of new bitcoins is lower, making buying more expensive. Of course, long time “hodlers” can always sell, but when any market experiences a supply squeeze, prices usually go up.
When is the 2028 Halving?
It is estimated that Bitcoin’s 5th halving will occur on April 10, 2028.
Estimated dates for future Bitcoin halvings can be seen at the Bitcoin Halving Clock.
New bitcoins will continue to be created in the future, although at a rapidly declining rate, until no more new bitcoin can be created.