Bitcoin Halving: What Happens When New Supply Is Cut In Half Every 4 Years
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Bitcoin "halving" refers to the event every 4 years when the mining reward is cut in half. This reduces the new supply of bitcoin entering the market.
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Historically, bitcoin prices have surged dramatically in the months surrounding each halving event. For example, bitcoin rose from $12 to $200 after the 2012 halving.
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The reduced supply from the halving, combined with steady or increasing demand, leads to basic economic forces that push the bitcoin price upwards according to principles of supply and demand.
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The halving plays an important role in transitioning bitcoin to be more self-sustaining in the long run rather than relying on new supply for network security.
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While the halving tends to boost positive market sentiment in anticipation of price gains, it can also spark uncertainty and volatility in the short term.