Bitcoin halving: what is Bitcoin mining, price, when is Bitcoin halving day - latest crypto news

Bitcoin halving is a significant event in the cryptocurrency world, affecting its economics, mining dynamics, and market sentiment.

As the cryptocurrency world eagerly anticipated the next imminent Bitcoin halving event this weekend, which has now taken place, enthusiasts and investors alike were braced for potential seismic shifts in the market.

But what exactly is Bitcoin halving? How does it work and what could it mean for the price of the cryptocurrency? Here is everything you need to know about it.

What is Bitcoin halving?

Bitcoin halving, often referred to as "the halvening," is a predetermined event built into the Bitcoin protocol that occurs approximately every four years or after every 210,000 blocks are mined.

Bitcoin can be imagined as a big maths puzzle-solving competition where miners compete to solve complex problems, puzzles that need solving to process and confirm transactions on the Bitcoin network.

This problem is like finding the right combination to unlock a safe. It's tough and requires a lot of computing power.

As such, miners use powerful computers to guess the correct combination (or "hash") that solves the problem, making millions of guesses per second until someone finds the right one.

Every time a miner successfully solves a problem and creates a new block - which is added to the blockchain, a public ledger that records all Bitcoin transactions - they're rewarded with bitcoins.

It is this reward that is halved during Bitcoin halving, events that are coded into the Bitcoin software to control the rate at which new bitcoins are created and maintain the cryptocurrency's scarcity over time.

Initially, when Bitcoin was launched in 2009, miners received 50 bitcoins as a reward for every block they successfully mined. Then, in 2012, the first halving event occurred, reducing the reward to 25 bitcoins per block.

In 2016, the second halving took place, decreasing the reward to 12.5 bitcoins. Subsequently, in 2020, the third halving happened, bringing the reward down to 6.25 bitcoins per block.

Why does it happen?

The creator of Bitcoin intended there to only ever be a maximum of 21 million bitcoins in circulation. The primary purpose of Bitcoin halving is to curb inflation and ensure that the total supply of bitcoins remains finite.

With each halving, the rate at which new bitcoins are introduced into circulation decreases. There are currently around 19 million bitcoins in circulation - the 21 million total is expected to be reached in 2140.

This deflationary nature of Bitcoin contrasts with traditional fiat currencies, which can be printed indefinitely by central banks, potentially leading to inflation.

Bitcoin halving also plays a crucial role in regulating the profitability and sustainability of Bitcoin mining operations, and as the block rewards diminish, miners must rely more on transaction fees to remain profitable. This encourages miners to prioritise transactions with higher fees, leading to increased competition and potentially higher transaction fees for users.

Halving events can also affect the overall hash rate of the Bitcoin network, as some less efficient miners may become unprofitable and shut down their operations.

Will it affect the price of Bitcoin?

One of the most closely watched aspects of Bitcoin halving is its impact on the price of Bitcoin, and historically, Bitcoin halving events have been associated with significant price movements, both before and after the event. The anticipation of reduced supply often drives speculative buying activity, leading to price increases in the months leading up to the halving.

After the halving occurs, the reduced rate of new supply entering the market can create upward pressure on prices if demand remains constant or increases. It's important to note that Bitcoin's price is influenced by a wide range of factors, including market sentiment, adoption rates, regulatory developments, macroeconomic trends, and technological advancements.

While halving events can contribute to short-term price volatility, they are just one of many factors that influence the long-term value proposition of Bitcoin.

When is the next halving?

It’s been four years since the last Bitcoin halving event, and so the cryptocurrency is due another. It’s hard to predict exactly when the next halving will occur, due to the decentralised nature of the Bitcoin network and the variable block generation time, but the upcoming halving event is anticipated to occur this Saturday (20 April).