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Block halving is an event that occurs once roughly every four years wherein the block reward miners receive upon solving a block on the Bitcoin network is reduced by half. As a result, the rate at which new bitcoins are generated decreases. The halving event is periodical and is programmed into Bitcoin’s code. According to the Bitcoin algorithm once every time 210,000 Bitcoins enter circulation, a halving takes place.
Historically, there have already been 2 halving events: the first in 2012 and the second in 2016 where the block rewards decreased from 50 to 25 and 12.5 respectively. Consequently, in the upcoming halving in 2020, the block rewards will become 6.25. Since there is a set number of bitcoins (21 million), there will only ever be 64 halvings in history.
There is no fixed date for the halving event as it depends on when block #630,000 (3x210,000) will be mined. On average one block is mined every 10 minutes, and 144 blocks are mined every day and as a result, 1,800 bitcoins are mined approximately every day. At this pace, there is an average of four years between halvings with the next one due in mid-2020. Nevertheless, since the rate of bitcoin mining fluctuates, the exact date the halving event will occur is still unknown.
The value of Bitcoin becomes notoriously volatile around and after a block halving, meaning its prices can change rapidly during this period. Because of this it is impossible to predict the future of Bitcoin prices after the halving with complete certainty.
However, both in 2012 and 2016, the price of Bitcoin rose to mentionable highs around a year after each previous halving event in addition to its overall growth over the years. There are a few explanations for this effect. First, by reducing the rate at which new Bitcoins enter the market, scarcity is created and the Stock-to-Flow ratio is disturbed, thus driving prices up.
Additionally, people’s experience with the previous halvings has resulted in crypto enthusiasts proactively betting on the price-growth for 2020 which acts as yet another catalyst for growing prices.
With the likelihood of Bitcoin’s value increasing with each halving event, holding onto your crypto has become exponentially more profitable.
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*This is not financial advice.