Bitcoin Halving

The Bitcoin halving, or halvening, is the process by which the miner block rewards are reduced over time. Every 210,000 blocks that are mined, or approximately every four years, the reward is cut in half, meaning that the new daily supply of bitcoins added to the network each day is reduced by half. The last Bitcoin halving event, and third in Bitcoin’s history, was on May 11, 2020, with the block reward reduced from 12.5 bitcoins per block to 6.25. The next halvening is currently on a course for March 2024. Again, this fixed monetary policy and predictable inflation schedule are in stark contrast to those of central banks around the world and their history of intervention.

Once the 32nd halving is complete, projected for 2140, the reward will go from 0.00000001 BTC to zero. There will then be no more new bitcoins created, and the total supply of 21 million BTC will have been reached. At that point, Bitcoin miners will be reliant upon network transaction fees alone to compensate for their computational power.

As the amount of new BTC mined shrinks after a Bitcoin halving event, historically there is an increase in price (not surprising given the mechanics of supply and demand). While there are many supply dynamics in the market, and the effect of future halvenings may be dampened as the reduction in new BTC supply is smaller, it seems to have been a driver of the three main bitcoin market cycles so far.