What if we tell you that the total gold reserve of the world known through technical predictions is just 2000 tonnes, out of which 1800 tonnes have already been extracted? You will think that it’s just a matter of time before we end up extracting the entire 2000 metric tons of gold available. What if there is a condition that cuts down the amount of gold extracted significantly after every period? Now, things have changed! You know there is gold available, but no matter what you do, you’ll only receive less and less rewards as you keep digging!
Now, let’s talk in BTC terms. There are only 21 million Bitcoin present, out of which 19 million have already been mined. The remaining 2 million will be mined by the year 2140 due to the halving factor that reduces the reward miners receive on mining 210,000 blocks roughly every four years. After 2140, the miners will be rewarded with a transaction processing fee that network users will pay.
Understanding Bitcoin Halving
Basically, Bitcoin halving is an event introduced by the Bitcoin protocol that reduces the number of new coins earned by miners after almost every four years, when the miners are able to mine 210,000 blocks. This ultimately contributes to one of the most significant features of Bitcoin, the ‘limited supply and issuance mechanism.’ With the supply of the coin being controlled by the protocol, cryptocurrency has emerged as a store of value and is often termed ‘Digital Gold.’
The concept of halving, as embedded in the mining algorithm of the top cryptocurrency, is there to compensate for inflation, and it does so by maintaining scarcity. Well, where does that lead Bitcoin as an investment? With the pace of Bitcoin issuance being low, the price will increase if demand remains the same. The inflation rate of Bitcoin at the time of writing is less than 2%, and it is going to slip further with upcoming halvings!
The Halving event brings with it the scarcity of Bitcoin production, defining its finiteness. As far as you can understand basic mathematics, when the reward goes down, the supply is restricted, which further leads to increased demand, having an overall positive impact on the price of the coin.
Let’s discuss the functioning of the Bitcoin Halving event! Starting with mining, it’s a process where a decentralized network of validators authenticates all BTC transactions and gets paid 6.25 BTC if they are the first ones to do so. This is the reward that the miners are currently getting to utilize a complex math algorithm to add a group of transactions to the BTC blockchain.
Every 10 minutes, blocks of transactions are added, and once 210,000 blocks are created, the reward for miners is reduced to half as per the Bitcoin code.
Bitcoin Halving: History & Significance
Bitcoin halving is not a newly introduced concept. It has been present in the protocol since the inception of the first cryptocurrency. The first halving event of Bitcoin dates back to November 2012, followed by July 2016 and May 2020. Initially, the reward for mining was set at 50 BTC per block when Bitcoin was released in 2009. After the first halving event in 2012, the reward for Bitcoin mining slipped to 25 BTC per block.
The next halving event is set to occur in 2024, which will further restrict the reward to half. The last halving event will occur in 2140, post which all the 21 million BTC will be mined and put into circulation. As said previously, after the last Bitcoin is mined, miners will be paid transaction fees.
Well, even though no one can really tell when exactly the next Bitcoin Halving will take place. However, as per the experts, the next Bitcoin Halving event will take place in May 2024. What makes this event special is the fact that even though Bitcoin Halving procedures are designed in such a way that they are not much of a shock to the network. However, you just can’t deny that there is going to be a big trading event near the Bitcoin Halving event.
Will May 2024 Bitcoin Halving Pump BTC to $500k?
The $500K mark is just quite out of control when it comes to pumping BTC after the halving event. What contradicts more to this fact is that bull markets are getting tamer and more stable similar to what was always the scenario with the bears.
We can’t deny the fact that Bitcoin is maturing as an asset, and the swings in price are getting less and less severe. The Halving event is surely going to raise the price of BTC, but soaring 10 to 15 times is something that is not quite possible for BTC, as the price volatility decreases with the asset getting more and more mature.
The exact date of Bitcoin Halving can not be known. However, as per the experts, the next halving event could occur anytime around May 2024. It should be noted that the next Bitcoin Halving will be done at block 840,000.
Bitcoin halving has always resulted in price gains, and every halving event has witnessed the price of Bitcoin rise in months both before and after the event. Bitcoin is following a 1.74% inflation rate, and its value is increasing at this rate after every halving.
Clearly, no one can predict the exact price of Bitcoin at any point in the future; there have been speculations suggesting that Bitcoin might hit $120,000 by the end of the year 2024.
The halving event will occur at 840,000 blocks, cutting down the Bitcoin mining reward to 3.125 BTC for each block mined.
After the Bitcoin Halving event in 2024, the Bitcoin block reward will register a set drop from 6.25 BTC to 3.125 BTC. Ultimately, increasing the number of tokens in circulation and halving the reward.