Aside from knowing how to trade cryptocurrencies, noting the top performing currencies, exchanges, and different strategies, beginners should know what a bitcoin halving event is and how it will affect the market. A Bitcoin halving event is when the number of Bitcoins created and earned by the miners are cut in half. It is already a premeditated monetary policy made to implement transparency. This event is embedded in the blockchain code of Bitcoin and is expected by every trader.
Miners spearhead the mining process, often equipped with supercomputers and creating new blocks of transactions. They earn a profit by solving a certain Bitcoin block. The amount of reward that a miner gets is cut by half for every 210,000 blocks. If the reward started for 50 bitcoins, the miner that solves the 210,001th block receives only 25 bitcoins and the process continues. At an average, a total of 6 blocks are found every hour. If the halving event happens for every 210,000 blocks, the next halving event will happen roughly every 4 years.
The halving event keeps the value and demand for Bitcoin on a pedestal. Since the number of Bitcoins is finite, a monetary policy must be implemented to control its supply. It follows the law of demand and supply. If there is no halving event, more people will be interested in becoming miners and might continuously mine. This can lead to sudden inflation which typically occurs in fiat currencies around the world. Since there is no central authority in cryptocurrencies, the policy is embedded in the blockchain technology.
Since the boom of Bitcoin in 2009, there are already three halving events that have occurred. The first event happened on November 28, 2012 with the reward starting from 50BTC down to 25BTC. The price of Bitcoin before the event was $12 and there had been no price changes after the halving. The second event took place on July 9, 2016 with the Bitcoin price being $650 and increased significantly to $675 after the halving event. The next Bitcoin halving event is expected to happen on May 31, 2020, with the current average mining rate.
A lot of websites are doing a countdown of the halving event. Traders expect the price of Bitcoin to increase after the next halving. There are still a lot of Bitcoins to mine, but as halving events occur, the number of Bitcoins is getting fewer and fewer. Miners will have to upgrade their equipment to allow faster mining and earn more rewards.