Bitcoin Halving: Prices expected to increase as cryptocurrency gets scarcer

Bitcoin halving occurs about once every four years, and is designed to reduce the rewards for miners. With the fourth halving, the block subsidy has decreased from 6.25 BTC to 3.12 BTC. The reduction directly impacts miner revenue.

The total supply of Bitcoins is capped at 21 million coins. (Image Credit: Bing Image Creator).

New Delhi: Bitcoin halving occurs about once every four years, driving prices up by reducing the rate at which new tokens enter circulation. This increases the scarcity of Bitcoins, and is expected to drive up the prices like the previous three halvings. The rewards for mining the flagship cryptocurrency has now reduced to 3.125 BTC from 6.25 BTC for every block mined. The reduction in rewards has a direct impact on the revenues of miners.

The Bitcoin halving event occurred on 19 April, 2024, as miners rushed to extract the remaining blocks before the reduction in rewards. The community expected the halving to occur on 20 April, but the 840,000th block was mined a day earlier. The network is configured to halve every 210,000 blocks. There have been three previous halving events in 2012, 2016 and 2020, reducing the rewards from 50 to 25 to 12.5 to 6.25 BTC.

Only the most efficient miners will be profitable

The halving is expected to introduce significant changes to the crypto ecosystem. Only the most efficient Application-Specific Integrated Circuit (ASIC) machines are expected to operate profitably going forward. Older and less efficient ASICs may be phased out from the market, with next generation ASICs expected to have specific breakeven power costs depending on the hashprice.

Miners are also looking at custom ASIC firmware such as BraiinsOS and LuxOS to increase the efficiency of hardware, that lower breakeven points for electricity costs. Less efficient miners are expected to exit the network, due to the impact on profitability. Miners will now be getting half the rewards for their efforts, going forward.

How the ecosystem reacted to previous halvings

Following the first halving in 2012, the network hash rate declined and the less profitable miners exited the network. In early 2013, Bitcoin saw its first bull run, with prices increasing to $1,000 from $13. Following the second halving in 2016, the prices initially plummeted to $670, but then rose again to $2,550 in 2017. At the time of the third halving in 2020, BTC prices were around $10,000, but increased to $62,000 a year later, in 2021. BTC prices are now around $65,000, and is expected to surge in about six months to a year.