Bitcoin has a crucial event known as “halving”, which occurs approximately every four years. This process reduces mining rewards by half, directly influencing Bitcoin’s supply.
Halving events often have a significant impact on Bitcoin’s price, making them highly anticipated by investors and market participants. In this article, we will break down how halving works and its effects in a beginner-friendly manner.
What is Bitcoin Halving?
Bitcoin halving is the event where the number of new Bitcoins issued through mining is cut in half. Bitcoin is generated through a process called mining, and its reward system follows a predetermined schedule that reduces issuance approximately every four years.
Bitcoin has a fixed supply cap of 21 million coins, meaning it cannot be created indefinitely. Through halving events, the rate of new Bitcoin issuance slows down, ultimately leading to the total supply reaching its limit.
This halving mechanism is embedded in Bitcoin’s code and cannot be altered manually. The system is designed to maintain Bitcoin’s scarcity and prevent inflation.
The 2024 Halving (4th Halving) and Mining Reward Changes
The 4th Bitcoin halving occurred in April 2024, reducing the mining rewards as follows:
- 2009 (Bitcoin launch) → 50 BTC per block
- 2012 (1st halving) → 25 BTC per block
- 2016 (2nd halving) → 12.5 BTC per block
- 2020 (3rd halving) → 6.25 BTC per block
- 2024 (4th halving) → 3.125 BTC per block
With each halving, the number of new Bitcoins entering circulation decreases, reinforcing Bitcoin’s scarcity over time.
How the 2024 Halving Affected Bitcoin’s Price
Historically, Bitcoin’s price has tended to rise around halving events due to the reduced supply entering the market.
1. Increased Scarcity and Higher Demand
When new Bitcoin issuance decreases, the available supply in the market shrinks. If demand remains constant or increases, this supply shock can drive the price higher.
Leading up to the 2024 halving, many institutional and retail investors bought Bitcoin in anticipation of a price increase, causing fluctuations in the market.
2. Price Trends Before and After Halvings
Looking at previous halvings, Bitcoin has experienced significant price surges within 12-24 months after the event.
2016 Halving (reduction to 12.5 BTC) → Price increased 20x within a year ($600 → $20,000)
2020 Halving (reduction to 6.25 BTC) → Price increased 10x within a year ($3,000 → $60,000)
2024 Halving (reduction to 3.125 BTC) → As of February 2025, the long-term impact is still being evaluated
While it is too early to determine the full effect of the 2024 halving, historical data suggests that Bitcoin could experience another significant price increase by 2025-2026.
3. Impact on the Mining Industry
Since halvings reduce mining rewards, miners earn fewer Bitcoins for the same amount of work. This particularly affects miners with high electricity and operational costs, making profitability more challenging.
To remain competitive, many miners seek cheaper energy sources and more efficient mining hardware. The 2024 halving may have also led to smaller mining operations shutting down, while large-scale mining firms strengthened their dominance in the industry.
4. Influence on Long-Term Investment Strategies
With each halving, Bitcoin’s new supply diminishes, reinforcing its scarcity. As a result, more institutional investors and corporations are adopting Bitcoin as a long-term asset.
Additionally, with persistent global inflation, Bitcoin is increasingly seen as “digital gold”, offering a hedge against fiat currency devaluation and financial instability.
Conclusion
Bitcoin halving is a fundamental mechanism that reduces mining rewards by half every four years, slowing down Bitcoin’s issuance and maintaining its scarcity.
The 4th halving in April 2024 reduced mining rewards from 6.25 BTC to 3.125 BTC, further limiting Bitcoin’s supply. Key takeaways from this event include:
- Reduced supply potentially leading to price increases
- Lower mining profitability affecting industry dynamics
- Bitcoin’s strengthening role as a hedge against inflation
As of February 2025, we are still assessing the full impact of the 2024 halving. However, if past trends hold, Bitcoin’s price could see substantial growth by 2025-2026.
Keeping an eye on these developments is crucial for understanding Bitcoin’s long-term value and market behavior.
