Miners are reaching for the remaining 5% of Bitcoin reserves.
The Bitcoin network, a decentralized digital ledger for tracking transactions and Bitcoins, has undergone several significant changes since its inception in 2009. One of the most notable developments is the halving of the miner reward, which occurs approximately every four years.
The Halving Process
Every 210,000 blocks mined, the miner reward is halved in a process known as halving. This process has taken place four times since Bitcoin's launch, with the most recent halving occurring in April 2024. As a result, the current miner reward for mining a block on the Bitcoin network is 3.125 BTC per block.
Impact on Mining and Supply
Each halving reduces the block reward by 50%, making mining less profitable unless the Bitcoin market price rises to compensate. Miners face increasing operational costs while receiving fewer bitcoins, creating pressure for efficiency in mining or increased Bitcoin price to maintain incentives.
The total supply of Bitcoin is capped at 21 million coins. Halvings slow down the issuance rate of new bitcoins, maintaining scarcity by progressively limiting the supply growth rate. This controlled supply expansion mimics precious metals like gold and aims to support Bitcoin’s long-term value.
Historically, Bitcoin prices have tended to rise following halvings, often experiencing significant appreciation in the 12-18 months after the event due to reduced supply inflows and sustained or growing demand. However, recent trends (post-April 2024 halving) suggest this effect might be less pronounced, as Bitcoin’s price increased only about 43% twelve months after that halving, which is unusually modest relative to prior cycles.
Changing Market Dynamics
Institutional factors and broader macroeconomic conditions are now seen as influencing Bitcoin’s price cycles more strongly, suggesting the traditional four-year halving cycle may be losing some of its predictive power for price trends. The launch of Bitcoin ETFs and institutional adoption has shifted dynamics, leading to potentially smoother, longer-term growth phases rather than sharp cyclical booms.
The Future of Bitcoin Halvings
The next halving on the Bitcoin network is expected to occur in 2028, tentatively around March 30, 2028. As the Bitcoin network continues to evolve, it is essential to understand the impact of halvings on the mining process, overall supply, and price trends. While the traditional four-year halving cycle may be changing, the steady reduction of mining rewards and slowing supply growth will likely continue to play a significant role in shaping the Bitcoin landscape.
[1] Investopedia. (2021, February 15). Bitcoin Halving: Everything You Need to Know. https://www.investopedia.com/terms/b/bitcoin-halving.asp
[2] CoinDesk. (2021, March 11). Bitcoin Price Hits New High After Halving, But Will It Sustain? https://www.coindesk.com/markets/2021/03/11/bitcoin-price-hits-new-high-after-halving-but-will-it-sustain/
[3] Cointelegraph. (2021, April 28). Bitcoin price rises 43% since halving, but is this the new normal? https://cointelegraph.com/news/bitcoin-price-rises-43-since-halving-but-is-this-the-new-normal
[4] The Block. (2021, April 27). Bitcoin’s halving event is over, but its impact is already fading. https://www.theblockcrypto.com/post/88609/bitcoins-halving-event-is-over-but-its-impact-is-already-fading
- The ongoing halving process, where the miner reward for mining a block on the Bitcoin network is reduced by 50% every 210,000 blocks, further emphasizes the integration of technology and finance within the Bitcoin system.
- The impact of halvings on the Bitcoin network extends beyond mining, as they help maintain Bitcoin's long-term value due to the controlled supply expansion, similar to precious metals like gold, thanks to the slowing issuance rate of new bitcoins.
