It’s an excellent time to learn more about the Bitcoin halving. We’re expecting another event to take place in mid-April.

Bitcoin halves cycle is a recurring event which reduces blockchain rewards given in bitcoin to miners who validate transactions and create new blocks on blockchain. This occurs roughly every four years. It happens when the total number of blocks on the Bitcoin Blockchain reaches a threshold. The current value is 210,000 blocks.

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The halving is designed to maintain Bitcoin’s scarcity by reducing the rate of new Bitcoins entering the market. This process will eventually result in the mining of 21,000,000 Bitcoins, and no new Bitcoins will be generated after this final halving.

What is the Bitcoin Halving?

In the past, Bitcoin halvings have had a positive impact on Bitcoin’s price. This event is often a source of optimism for crypto investors and leads to a positive price movement. The positive price trend can be attributed a number of factors. The first is that the decrease in supply issuance rates highlights Bitcoin’s scarcity. This can increase demand, and therefore its price.

The halving event also brings attention to crypto, which attracts new investors and contributes to increased trading. It’s important to remember that, while the halving has historically led to price increases in the crypto space, these increases could diminish with subsequent halvings.

We compared the distribution of weekly return of each halving interval as bitcoin’s value increased from 0.1 USD to the recent levels of 50kUSD per BTC.

Source: CoinDesk Indices

The July 2010 to October 2014 period uses BTCUSD prices from ; Outliers 0.5% and 99.5% have been removed for the sake of illustration.

Source: CoinDesk Indices

The overlay of these distributions and the comparison of annual returns and volatility shows that the distribution of return has narrowed over time as the bitcoin market matured, from a hobby for crypto enthusiasts to a real asset of institutional interest. The evolution of the bitcoin market can be seen by the decline in returns and volatility with each successive halving. Return per volatility has remained more stable after the initial halving. This evolution indicates that investors shouldn’t expect the same performance gains as when Bitcoin was at its infancy prior to 2012.

Bitcoin miners are one area that will be directly affected by this halving, as the block rewards for any new blocks will immediately be halved. The reduction of mining rewards could affect the revenue and profitability of miners, as they may face increased competition, higher operating costs and possibly consolidation in the mining industry. The smaller miners will struggle to stay profitable while the larger players who have more resources, cheaper electricity sources and economies of size may dominate.

After all 21,000,000 Bitcoins are mined, Bitcoin mining will become reliant solely on transaction charges. The shift will take place approximately 31 years after Bitcoin was created. The miners will have to adjust to the change to relying only on transaction fees. This will happen gradually, as each halving will occur.

In the crypto-space, there are many innovations. For example, additional protocols and tokens coexist with Bitcoin (e.g. Ordinals may offer miners the opportunity to optimize and diversify their mining operations in order to generate revenue that goes beyond Bitcoin block rewards.

Bitcoin has evolved from a hobby for cryptography enthusiasts and cypherpunks to a digitally scarce store of value, with its own spot exchange-traded funds and regulated derivatives markets. The volatility of Bitcoin has decreased through market cycles and increased market capitalization. We should therefore be more cautious when analyzing past halving cycles because Bitcoin holders are different today than they were in 2010.

Benjamin Schiller is the editor.