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The cryptocurrency market has seen some explosive growth since its inception when Bitcoin was first invented back in 2009. Every four years, the bitcoin halving poses a significant shift in momentum for the entire cryptocurrency market. Despite the bitcoin halving only directly affecting bitcoin as a token, this single event in the cryptocurrency market marks the beginning for something big for the next 4 years in cryptocurrency.
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What is the bitcoin halving?
The bitcoin halving is an event scheduled to happen roughly every four years or after 210,000 blocks have been mined. This event lowers the rate at which new bitcoins are created by the network by adjusting the half reward for mining Bitcoin by validating transactions.
The reward was originally halved in 2012, going from 50 bitcoins to 25. There were more halvings in 2016 and 2020, bringing the reward down to 12.5 and 6.25 bitcoins, respectively. Recently, the block rewards halved to 3.125 previously in April 2024.
How does the bitcoin halving affect the 4-year cycle? It’s simply supply-and-demand where the demand of bitcoin as a store of value increases while the amount being produced decreases each year, causing prices to be programmed to increase each cycle.
Historically, each 4-year segment between halvings have been observed to imitate similar price action. It starts with a halving dump due to miner capitulation, followed by the bull market, then topping off before plummeting about 80% to bear market lows, before finally rallying for the next halving event.