Learning about Bitcoin halving is important for every crypto enthusiast, especially those interested in BTC. Read our blog to know more information about it.
One of the most popular and important terms in the crypto trading community is Bitcoin halving. Any one interested in buying or eventually trading Bitcoin should know what this is, as it can contribute to their crypto investing and trading plan.
Therefore, this brief article focuses on explaining what BTC halving is and relevant factors such as how it affects the market, does it offer any benefits for investors and more.
If you want to buy the flagship crypto asset then you should also familiarize yourself with the halving process and know when the next Bitcoin halving is set to occur.
Here is everything you need to know as a BTC enthusiast.
What is Bitcoin Halving?
The term ‘halving’ indicates what this process is about and what it means. BTC halving is basically a process where the future supply of the crypto king is cut in half. This occurs after every four years and once it occurs the number of BTC in circulation are slashed in half.
The purpose of repeating this process after a set period is to make sure that the supply is kept in check, while the demand for Bitcoin keeps growing. This protects the flagship crypto asset from inflation.
Now this may seem like a simple process but it greatly affects several aspects of the crypto space, including the miners. As seen below.
How Halving Impacts the Miners?
New BTC is created through a process called mining. It requires great computational energy and the people who create new BTC are called miners.
The mining process digitally adds more transaction records to the blockchain. If you are mining then you can earn crypto assets without investing money for it. This means that a miner is rewarded newly minted BTC when they use their computing power to validate transactions.
When Bitcoin halving occurs, the number of newly minted BTC that is to be awarded to the miners is reduced to half as well. This results in a decline in the number of new BTC created from block validation. This reduces the supply of BTC while its demand in the market keeps rising.
What are the Basic Mechanics of Halving?
There are two countdowns to keep a track of the next Bitcoin halving. One moves a little slower than the other, which causes a difference in the ETA of both countdowns. This is a result of the addition of a new block after every 10 minutes.
It has been mentioned above that Bitcoin halving occurs after every four years. However, due to the addition of new blocks this may not be completely accurate. Keeping this in mind, a more accurate way to calculate when the next BTC halving will occur is after every 210,000 blocks.
How Does Halving Impact the Crypto Market?
Bitcoin is the largest cryptocurrency and has an undeniable significance. It approximately has 60% dominance on the crypto market. This means that any fluctuations noted for the price of BTC also induce fluctuations for the prices of other altcoins.
If the price of Bitcoin drops, you can be sure to see a drop in the prices of all other digital assets in the industry.
However, when the flagship crypto asset is in a bull run, the altcoins mostly lose their value and start underperforming. This is because when the investors get the chance to invest in BTC they do. Especially since after Bitcoin halving the price of the crypto king increases, the investors take their investments out from the altcoins and use them for accumulating BTC instead.
This is how the halving process affects the general crypto market.
Overview of the Halving Timeline
Before you get to know when the next halving will occur for BTC, it is important that you take a look at the timeline of this process since the crypto king was established.
Bitcoin is the pioneer of the crypto industry and was created in 2009. At the time, the Bitcoin block reward was 50 BTC per block.
The first halving occurred four years later in 2012 and reduced the BTC supply in half. It also reduced the block reward, which was then 25 BTC per block.
The second halving occurred in 2016 after which the Bitcoin block was even lower to 12.5 BTC per block.
The next and third halving occurred four years later in 2020 and it further slashed the block reward, which was 6.25 BTC per block at the time.
Now the fourth and the next Bitcoin halving is set to occur in 2024, after which the block reward will be 3.125 BTC per block.
Can you Benefit from Halving?
Professional traders make use of several strategies to benefit from Bitcoin halving. However, a popular and easy strategy is to purchase BTC and hold until after the halving is complete. Since the price of the asset surges after the halving you will have a better chance to sell at a good price.
Therefore, if you are interested in Bitcoin then the opportunities offered by the crypto space are not limited to buying or trading only. However, to explore these options you need to take time and learn about concepts such as Bitcoin halving and others.