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“A smart investor enters the market when others are feeling negative about it and the value is lower than it’s intrinsic value”

What is Bitcoin Halving? All you Need to Know About Bitcoin Halving 2020

Bitcoin Block Reward Halving Countdown

168Days 04Hours 42Min 03Sec

Reward-Drop ETA date: May 2, 2020

Bitcoin halving is the process of decreasing mining block reward for 50% that happens every 210 000 blocks (roughly every four years). 

The traditional financial system keeps printing more and more fiat money that makes existing bills less valuable. 

In the same time, because of halving, less and less new Bitcoin will be created over time.

Due to its limited supply, Bitcoin will continue to become increasingly scarce.

Seeing as the maximum supply cap for Bitcoin is 21 million, halving the block reward means that it will take longer for all Bitcoin to enter circulation.

As the total supply won’t grow at a rapid rate, any increase in demand will be followed by the rise in the price.

In this article, we are going to bring you all the necessary information about Bitcoin halving you should know. 

What happens during the Bitcoin halving?

For the Bitcoin network to function well, there is a process called Bitcoin mining that maintains the entire Bitcoin ecosystem.

Bitcoin miners using special mining algorithms are trying to guess the transaction hash

Most people think that they are solving some mathematical problems. 

That’s not the case.

Bitcoin blocks are created by verifying the hashes on a lottery basis. Yes, a lottery!!

Even though, I don’t like this metaphor because the entire process is way more complicated, but that’s in general how mining works.

They are hashing the block header (all candidate transactions are inside the block already) to find a value lower than the target difficulty (it needs more 0s at the start).

People can’t do it because there is a lot of potential combination and we would need the entire century to guess the hash. 

On the other side, Bitcoin miners discover new block approximately every 10 minutes that consists of all confirmed transactions for that period. 

Since Bitcoin network can process up to 6 transactions per second, in one block, there could be up to around 3600 Bitcoin transactions. 

There is one more important parameter which is block size

Bitcoin network can accept blocks with block size up to 1 MB. 

When you combine these two factors, the average number of transactions in the Bitcoin block is around 2000. 

You can click here to check live stats.

We took some of your precious time to help you understand the process of mining. 

If you are one of the miners who guess the transaction hash of the transaction that ended up in the Bitcoin block, you will get a mining reward.

There are two types of mining reward, transaction fees and block mining reward.

The transaction fees are paid by those that are sending their Bitcoin to others. 

The higher fees they pay, the sooner miners will pick their transactions because they will get more for confirming and broadcasting their transactions to the Bitcoin network. 

The block mining reward is the percentage you get for being part of discovering a new block. 

When a new block gets discovered, new Bitcoins are created and sent to miners as a reward for confirming transactions and maintaining the entire ecosystem. 

Since Bitcoin is meant to have a total supply of 21 million coins, the block reward is being seized every 210 000 blocks by half. 

The process of seizing mining block reward is called halving.

When was the last Bitcoin halving?

As we mentioned above, Bitcoin halving happens every 210 000 blocks. 

The first Bitcoin halving was at the block number 210 000 when mining block reward went from 50 Bitcoin per block to 25 Bitcoin per block. 

It was on 28 November 2012.

At that moment there were 10 500 000 Bitcoins in circulation. 

The second Bitcoin halving was at block number 420 000 when mining block reward went from 25 Bitcoin per block to 12.5 Bitcoin per block. 

It was on 9 July 2016.

At the moment of halving, there were 15 750 000 Bitcoins created. 

When will be the next Bitcoin halving?

The next Bitcoin halving will happen when the block number 630 000 is reached. 

The mining block reward will go from 12.5 Bitcoin per block to 6.25 Bitcoin per block. 

That will be the third halving projected happen in May 2020, but the exact date is unknown, and the reason is very simple.

Even though everyone says that new blocks are discovered every 10 minutes, blocks have been mined at less than 10 minute intervals for almost all of Bitcoin’s history.

Average block time for August 2019 was 9 minutes and 32 seconds. 

Last time we have a month with an average time at 10 minutes or above was back in February 2012. 

You can click here to check live stats

That’s why most counter websites are estimating late-May Bitcoin halving, but according to these stats, it would probably be mid or early-May. 

Once 630 000th block is created, there will be 18 375 000 Bitcoins in circulation. 

The fourth halving will happen at block number 840 000 when the mining block reward will drop from 6.25 Bitcoin to 3.125 Bitcoin per block. 

It is projected to happen between May and June 2024.

That will be the time when 19 687 500th Bitcoin will be created.

There will be only 1 312 500 left to be created or less than 7% of the total number of Bitcoin that will ever be in circulation. 

The fifth Bitcoin halving will happen at block number 1 050 000, the sixth Bitcoin halving will happen at block number 1 260 000, the seventh Bitcoin halving will happen at the block number 1 470 000…

The mining block reward will further decrease until all Bitcoins are mined that should happen by 2140. 

However, more than 98% of all Bitcoins will be mined by 2030. 

How will Bitcoin halving affect the price of Bitcoin?

As you already read, we had 2 Bitcoin halvings so far, and we are anticipating third Bitcoin halving to happen. 

So far, the history has shown that Bitcoin halving was the catalyst, or one of them, that propels Bitcoin for a bull run

On the chart below, we marked the previous halving dates. 

We can see that Bitcoin tends to begin its new bull trend cycle at least a year before its halving.

It is also clear that the price continued going up after the halving dates.

Let’s look closer at each halving to see how did Bitcoin perform.

How did Bitcoin perform in the first halving?

Just after the halving occurred, the price skyrocketed and made nearly 2000% rise. 

Then it spent 4-5 months accumulating before making one more move up making a total rise of more than 9000%. 

It took price exactly one year from the first Bitcoin halving to reach the highest price for that time span. 

Even though these numbers are impressive, we have to admit that halving wasn’t the only catalyst. 

There were also other reasons that easily affected a very small market at that time. 

But halving was one of the biggest reasons. 

How did Bitcoin Perform in the second halving?

Even though it didn’t outperform the first halving in percentage terms, it was the catalyst for the biggest Bitcoin bull market we saw so far.

Similar to the first halving, once halving happened, the price started going up into the phenomenal rise of nearly 3000%. 

It took a year and a half from halving date to the highest price set in December 2017. 

What can we expect from Bitcoin after third Bitcoin halving?

Trying to predict the future by looking in the past is not the smartest idea. 

Previous halvings were significant because the drops in the bitcoin supply inflation annual rate went from ~25% to ~12% in the first halving, then ~8.3% to ~4.2% on the second halving.

This halving the drop goes from ~3.7% to ~1.8% on an annual basis which is not that big change compared to first two.

But considering the previous two halvings, we can be optimistic in anticipation of the third halving. 

Maybe it won’t make astronomical moves up, but it can be one of the catalysts that will set Bitcoin for reaching a new all-time high. 

Why is Bitcoin halving important?

The world’s money is being inflated by new money being printed over and over again. 

One of the biggest advantages Bitcoin has is its deflationary nature, where after each Bitcoin halving, less and less Bitcoins are being created.

It’s supply and demand that determine the value of something. 

If the supply is going up, the value goes down. 

If the supply goes down, the value goes up. 

On the other side, if demand goes up, the value will follow. 

If demand goes down, the value will go down as well. 

It is very important to understand these principles.

They are the reasons why the value of fiat money is going down. 

Because of enormous printing, the supply goes up more than the demand can follow, and the value of fiat money goes down. 

On the other side, the supply of Bitcoin is limited to 21 million coins, and we have already more than 80% of coins that are mined. 

It means that the supply doesn’t have too much room to grow. 

Any increase in demand should cause an increase in the value of mined coins. 

This is possible thanks to halving, that decreases the number of coins that will be created and prevents Bitcoin to be inflated. 

That’s why the halving is so important and why people think of it as a bullish event. 

Without halving, Bitcoin would mine forever, and its supply would continue growing over and over again making it same as inflated government money. 

Conclusion

During previous halvings, the biggest overall factor was greed.

People thought it would move higher, and they bet money on that outcome.

I think this will still be in place with the next halving, but it will be supported by an emotion that is even more powerful, fear.

The financial system will be under more pressure, the stock market is at all-time highs, debts are ever-increasing, stability makes way for volatility, the fiat system will become more unstable.

Depending on how big the fear will be in the run-up, during and after the halving, it could have a big impact this time.

To an extent, the dynamics of the next halving could even outrun the previous halvings.

We hope you understood what Bitcoin halving is and its importance to the entire Bitcoin ecosystem. 

Also, we hope you got the point why it is considered as a bullish market event and why it is expected to bring buyers in the market. 

We appreciate your support and hope that you will find a lot of valuable articles on our website. 

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