What is Bitcoin halving?
A Bitcoin halving occurs every four years and involves halving the rate at which new Bitcoins are created by halving the rewards of Bitcoin mining. This reward system will continue until 2140, when the limit of 21 million coins will be reached.
The halving policy was written into Bitcoin’s mining algorithm to counteract inflation by maintaining a limited supply of Bitcoins. Theoretically, the reduction in the rate of Bitcoin issuance means that the price will increase if demand remains the same.
Impact of the Bitcoin price
Historically, Bitcoin halves have led to price increases due to supply-demand dynamics. As mining rewards decline and the pace of production slows, prices can be driven up.
Bitcoin halves have historically been associated with market rallies. The next halving is scheduled to take place in the first half of 2024.
Why does it happen?
Bitcoin halving is a feature built into the Bitcoin protocol to control inflation and ensure a limited supply in relation to demand.
It reduces the rewards miners receive for solving complex mathematical problems, which are crucial for verifying and recording transactions on the Bitcoin blockchain.
Halving the rewards reduces the rate of creation of new Bitcoins over time and limits the total number of Bitcoins that will ever exist to 21 million.
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