Bitcoin Halving 101 – What It Is and What to Expect

Key takeaways

- Blockchain mining is a peer-to-peer computer process used to secure and verify Bitcoin transactions

- A “new” block of data is produced by a miner approximately every 10 minutes

- Bitcoin users pitch in a small transaction fee in BTC to miners involved in processing their transactions

- To participate in Bitcoin's blockchain network as a transaction processor and validator, Bitcoin uses a proof-of-work (PoW) system

- Bitcoin halving occurs roughly every 4 years. It is when the supply of Bitcoin and the reward for mining Bitcoin transactions are cut in half

- Halvings reduce the rate at which new BTC are created

- Bitcoin halving typically brings about times of higher volatility

Bitcoin (BTC) is a form of decentralized digital currency powered by blockchain technology, which is an open-source code that pairs (or chains) blocks of transaction histories. Blockchain mining is a peer-to-peer computer process used to secure and verify Bitcoin transactions. Blockchain miners add Bitcoin transaction data to Bitcoin's global public ledger; a fancy word for a record sheet of all transactions occurring on the blockchain.

Mining your own business

It's completely legitimate, even desirable to make a profit from Bitcoin mining. Indeed, this is the built-in motivator that sustains the cryptocurrency ecosystem. Miners will continue to “build” the blockchain for years to come – by a way of “mining” or verifying all the transaction data flowing within the blockchain.

Bitcoin is mined in blocks, rather than in a consistent stream.  A new block of data is produced by a miner approximately every 10 minutes. As a return for their validation efforts, all Bitcoin users pitch in a small transaction fee in BTC to miners involved in processing their transactions.

To participate in Bitcoin's blockchain network as a transaction processor and validator, Bitcoin uses a system called proof-of-work (PoW); it is proof that work has been done on the validation. The work on the blockchain itself involves solving the encrypted hash, which takes time and energy.

At the time of this writing, it costs Bitcoin (BTC) miners at least $32,000 to produce one BTC, according to the latest data from MacroMicro.

Bitcoin halving: lowering the rate of BTC supply

Simply put, Bitcoin halving is an event when the BTC supply and the reward for mining Bitcoin transactions is cut in half. This is a repeating cycle that takes place roughly every four years after the network mines 210,000 blocks.

The next halving is expected to occur in April or May 2024. As of 2023, the blockchain network participants who validate transactions are awarded 6.25 BTC for each block mined. The block reward of the next halving event will drop to 3.125 BTC.

The final halving is expected to occur in 2140 when the number of Bitcoins circulating will reach the maximum supply of 21 million.

Can I capitalize on Bitcoin halving?

It turns out that Bitcoin halving events brings about quite the volatility, and traders can capitalize on the sharp price fluctuations as they present lucrative opportunities for scalpers and/or short-term traders. Typically, during such events, it is expected that the bull-bear power balance can skew sharply multiple times, and such volatility can be fueled further given the people-driven nature of the crypto world.

Before you consider engaging into cryptocurrency trading and/or investment, it is important to study and understand the inherently volatile nature of digital assets, and the financial risks associated with cryptocurrency trading.