Bitcoin halving is an inherent event in the Bitcoin network where the reward awarded to miners after transaction validation is reduced. On April 20, 2024, Bitcoin’s block reward was reduced from 6.25 BTC to 3.125 BTC. This marked the fourth halving since Bitcoin’s launch in 2009. The halving occurs automatically every 210,000 blocks, which is approximately every four years. This mechanism’s main purpose is to regulate the creation of new bitcoins and to limit the total number of bitcoins in circulation to an established maximum of 21 million.
As of April 2024, more than 19.7 million bitcoins have already been mined, leaving less than 1.3 million to be released in the coming years. Indeed, the scarcity of the cryptocurrency is achieved through the reduction of its supply, which is gradually shrinking and that protects the cryptocurrency from the risk of being inflated. Because of this scarcity, many people compare Bitcoin to gold and consider it a store of value.
Why Does Bitcoin Halving Happen?
Bitcoin halving is written into the original code by its anonymous creator, Satoshi Nakamoto. The halving mechanism ensures that the number of new bitcoins introduced into the system slows down over time. The supply dynamics of precious resources like gold show, that production is getting more difficult with time and this kind of system is helping retain or increase value of the production.
Every 210,000 blocks, around four years, miner reward is cut in half, which is why the reward is referred to as the block reward. This helps to control inflation and, in the meantime, bring the total supply closer to the cap of 21 million coins. The next bitcoin halving will occur in 2028 and the block reward will fall to 1.5625 BTC. This pattern will continue until all bitcoins are mined, which is estimated to happen around the year 2140.
Impact of Halving on Bitcoin Mining
It is also known that Bitcoin miners, that is, the individuals or companies that use power computers to solve complicated mathematical problems. In return for successfully processing a block of transactions, miner is given the reward in the form of new bitcoins. But with a halving event, the reward is cut in half, except if the price of Bitcoin goes up tremendously to compensate.
Following the 2024 Bitcoin halving, the reward dropped to 3.125 BTC. That reduction required many of the miners to review and reevaluate their operations, most especially smaller miners with little to no resources. For some, the lower rewards meant their operations were no longer financially sustainable. As a result, smaller miners either had to exit the industry or merge with larger firms that could afford more efficient hardware and lower energy costs.
In contrast to this, large-scale mining companies like Marathon Digital Holdings had already begun to set itself up for the halving. By that point in April 2024, Marathon had grown its fleet to 231,000 mining machines and its hash rate to 28.7 EH/s. This figure accounted for approximately 5% of the total network’s computational power, making it one of the dominant players in the space.
At some point in the future, as block rewards decrease over time in relation to diminished required things to validate a block, the profitability of mining will be increasingly dependent on transaction fees paid by miners to pay to have their transactions processed. Eventually, this will be the main source of income for the miners.
How Halving Affects Bitcoin’s Price?
Bitcoin halving events cause speculation about increasing future price. Historically, each Bitcoin halving has been followed by a significant bull run. To mention an example, after the 2020 halving, Bitcoin’s price has risen by more than 650% in the following year. However, this pattern has convinced many investors that the effect halving has on the price is because the tokens become scarcer, and that scarcity drives up this price.
In March, Bitcoin’s price went up to an all time high of $73,803.25 just before the 2024 Bitcoin halving. The optimism and a number of positive things happening in the crypto market drove up this increase. The most notable of the events was the approval of numerous spot Bitcoin Exchange Traded Funds (ETFs) by the United States Securities Exchange Commission (SEC) confirmed in January 2024. This helped institutional investors to get involved Bitcoin through these ETFs, and this attracted a lot of capital which inflated confidence for investors.
However, the post-halving period did not follow a simple upward trend. As if that wasn’t bad enough, spot Bitcoin ETFs experienced net outflows in early May, or when more investors started withdrawing money than stuck in. It indicated that while the long term optimism was still there, it was also uptight regarding external factors like interest rate policies, inflation trends and other things around the area of crypto space such as Ethereum.
Wider Effects on the Crypto Market
Bitcoin halving doesn’t only mean for Bitcoin, but for the cryptocurrency market in general. As the event becomes more widely covered by the media, news of digital assets become more popular. Consequently, people engaging in such transactions quickly end up raising the prices of all the alternative cryptocurrencies (also known as altcoins) in anticipation of further earning profits.
The momentum generated by the Bitcoin halving is used by some traders to invest in other coins, hopefuls that they will benefit from positive market sentiment in general. Sometimes, this trend occurs and it results in what is called an ‘altcoin season’, in which many cryptocurrencies aside from Bitcoin experience rapid price growth.
Unlike the classic fiat currencies that can be printed in infinite amounts, Bitcoin is a deflational asset due to its forecast halving and limited supply. This is especially appealing to those who are concerned about inflation, national debt and currency devaluation, in as much as we can predict and see exactly what’s being bought for the amount of our Bitcoin.
However, the volatility of Bitcoin remains to be a problem. Although it has the potential to be long term digital store of value, the project falls short of its everyday use due to price fluctuations and its slower transaction speeds than other payment methods.
Challenges Ahead: Energy Use and Sustainability
Concerns about Bitcoin mining have largely been fueled by the high amount of electricity needed to power it. They argue, that in regions where electricity is produced by non-renewable sources such as coal, the energy consumption is too high.
Mining rewards are cut in half by the halving, meaning there is increased pressure put on miners to become more efficient in their operation. Such a case might stimulate the industry to switch to renewable energy sources or high efficiency technologies. Thus, if the price of Bitcoin is not able to grow fast enough to offset reduced block rewards, some miners may have no choice, but to shut down, decreasing the network’s security.
However, if Bitcoin is able to transition to a miner incentive based on transaction fees over time, then Bitcoin will be able to continue to sustain the network in the long run. Mining can remain profitable even if no bitcoins are being created new, so long as the network can keep activity and fee revenue, but this isn’t necessarily possible.
Looking Toward the Future
As of April 2025, there are 29 more Bitcoin halving events left before Bitcoin reaches its final supply cap. In 2028, during the next halving, the reward will be 1.5625 BTC, and at this point that circulating supply will be more than 20.3 million coins. After that, less than 700,000 bitcoins will remain to be mined over the next century.
The final bitcoin is projected to be mined around the year 2140. After this point, miners will no longer receive new bitcoins as rewards. Instead, they will rely entirely on transaction fees to sustain their operations. If Bitcoin can work under this model in the long term, paying sufficient attention to the process of security, decentralization, miner participation, it will be healthy for the long term health of the Bitcoin network.
The concept comprises of limited supply, predictable issuance and rising awareness that makes it a unique asset in the global financial landscape. Despite all that, Bitcoin’s winning lottery called halving cycle is a key element of its design and has become, in a way, its long term value proposition.
