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The amount of new bitcoins mined every day will be cut in half in just a few days.
The amount of new bitcoins mined every day will be cut in half in just a few days. This event, known as the "halving" or "halvening," happens every four years and reduces the mining reward by 50%. This may sound like bad news for miners, but it's good news for bitcoin. The halving is a vital part of bitcoin's design, meant to control the supply of new bitcoins and keep inflation in check.
Here's everything you need to know about the halving and what it could mean for the future of bitcoin.
What is the halving?
The halving is a built-in feature of bitcoin's code. The mining reward gets cut in half every 210,000 blocks (roughly every four years). So, miners will receive 6.25 BTC for each block they mine instead of 12.5 BTC after the halving.
Why does the halving happen?
The halving is designed to keep inflation in check and ensure that new bitcoins are not created too quickly. Typically, when the economy grows, the money supply increases as well. This can lead to inflation, as too much money chasing too few goods can drive up prices.
Bitcoin is different. There will only ever be 21 million bitcoins created, and the halving ensures that new bitcoins are not created too quickly. By cutting the mining reward in half, the halving slows the money supply's growth and helps keep inflation in check.
What effect does the halving have on miners?
The halving greatly affects miners, as it effectively reduces their income by 50%. This means miners must find ways to cut costs or increase revenue to remain profitable.
One way miners could do this is by pooling resources together. By working together, miners can share mining costs and reduce their individual risk.
Another way miners could respond to the halving is by switching to more efficient mining rigs. This would allow them to mine more efficiently and offset some of the loss in revenue.
What effect does the halving have on bitcoin's price?
The halving also impacts bitcoin's price, as it can act as a catalyst for a rally. The reduced supply of new bitcoins can lead to increased demand and higher prices.
In the past, the halving has coincided with a big run-up in bitcoin's price. For example, in the months leading up to the 2016 halving, bitcoin's price rose from around $400 to nearly $1,000. And in the months leading up to the 2020 halving, bitcoin's price rose from around $7,000 to almost $10,000.
What else should I know about the halving?
The halving is a key part of bitcoin's design, and it's something that every investor should be aware of. It's a good idea to keep an eye on the halving date (which is currently estimated to be in 2024) and understand how it could impact the bitcoin price.
Investors should also be aware that the halving could temporarily reduce the hashing power of the bitcoin network. Some miners may switch off their rigs if they are no longer profitable. If this happens, it could lead to increased transaction times and higher fees. However, these effects are usually short-lived, as miners quickly switch back on their rigs when bitcoin prices rise.
The bottom line
The halving is a key event in the bitcoin calendar, which every investor should be aware of. It can potentially impact both the price of bitcoin and the mining industry. So, keep an eye on the halving date and be prepared for the possible price volatility that could occur around that time.
