Why does Bitcoin halving change the crypto market every four years

Bitcoin Halving is one of the most important mechanisms built into the protocol of the oldest cryptocurrency. In simple terms, it means that every 210,000 blocks ( approximately every four years ) the system automatically reduces the reward for miners by half. This is not a random process – it is a fundamental part of the design of Bitcoin that controls the rate of issuance of new coins.

How Halving Works and Why It Occurred

The developer of Bitcoin anticipated that the cryptocurrency should have a limited issuance, unlike traditional currencies that governments can issue in unlimited quantities. This principle of scarcity makes Bitcoin similar to gold – valuable precisely because it cannot simply be created infinitely.

Halving guarantees that the maximum issuance of Bitcoin will never exceed 21 million BTC. The process works sequentially: block rewards initially were 50 BTC, then decreased to 25, then to 12.5, and now to 6.25 BTC. Each halving is a programmed step towards the full issuance of all bitcoin by the year 2140.

History of Halvings and Next Stages

The first Halving occurred in 2012 when the reward dropped from 50 to 25 BTC per block. The second Halving took place in 2016 with a decrease to 12.5 BTC. In May 2020, the third Halving reduced the reward to 6.25 BTC.

The fourth Halving is expected to occur in April 2024 at a block height of 840,000. After this event, the block reward will decrease to 3.125 BTC. A total of 32 halvings are planned, after which the process will stop, and all 21 million bitcoin will be in circulation.

How Halving Affects You as an Investor or User

The most important thing to understand is that the Halving does not affect the amount of bitcoin you already have. If you have 1 BTC before the Halving, you will still have exactly 1 BTC after it. Coins do not “split” or disappear.

However, the Halving has an indirect but significant impact on the crypto market. When rewards to miners decrease, the cost of Bitcoin mining increases relative to the profit earned. This often leads to a reassessment of market prices, as investors reevaluate the scarcity and future issuance of BTC.

Bitcoin Tokenomics and Long-term Strategy

Halving is a key part of the Tokenomics of Bitcoin, which ensures a predictable issuance dynamics. Unlike central banks that make decisions about the amount of money in circulation, Bitcoin allows holders to know exactly how many coins will be issued in each time period.

More than 90% of all bitcoin has already been mined, which means that the largest part of Bitcoin's issuance potential has been realized. The remainder will be distributed gradually until the year 2140, when the last satoshi (, the smallest unit of BTC), will be mined.

This mechanism makes Bitcoin unique: it is a cryptocurrency with a guaranteed, predictable supply, making it attractive to both long-term investors and those interested in cutting-edge technology.