The so-called ‘Bitcoin halving’ was completed overnight from Friday to Saturday. This halving occurs once every four years and aims to counter Bitcoin inflation by making the currency scarcer. During the halving, the reward for creating new Bitcoins (also known as mining) is reduced. This has the effect of slowing down the rate at which new Bitcoins enter the market. This makes cryptocurrencies scarce, driving up their prices.
Miners play an important role in the Bitcoin network. They use powerful computers to solve complex mathematical problems and add new transactions to blockchains, such as Bitcoin’s global ledger.
Miners are rewarded in two ways. Users are rewarded through transaction fees paid for fast transactions and mining rewards, which are newly created Bitcoins. Currently, miners receive 6.25 bitcoins for their work, worth about $437,500. After the recent halving that occurred between April 18 and April 21, this reward will be reduced to 3.125 Bitcoin.
This reduction in rewards slows the rate at which new Bitcoins are created and ultimately reduces the total supply. This scarcity is important because it maintains Bitcoin’s value proposition as digital gold.
In the past, halvings have led to significant increases in the value of currencies. Therefore, cryptocurrency investors were looking forward to the fourth halving.
Currently, one Bitcoin is worth about $64,800. The value of the cryptocurrency has more than doubled in the past six months.
Although the current halving is not expected to affect the price of Bitcoin in the short term, many investors are expecting big gains in the coming months. These expectations are based on the cryptocurrency’s performance following previous halvings in 2012, 2016, and 2020.
Currently, 19.6 million Bitcoins have been mined. Ultimately, there should be a total of 21 million Bitcoins on the market. This differentiates digital currencies from fiat currencies such as the euro, which can be printed indefinitely.