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Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.
1. You could lose all the money you invest
2. You should not expect to be protected if something goes wrong
3. You may not be able to sell your investment when you want to
4. Cryptoasset investments can be complex
5. Don't put all your eggs in one basket
If you are interested in learning more about how to protect yourself, visit the FCA's website here.
For further information about cryptoassets, visit the FCA's website here.
Few events are as important in the life cycle of Bitcoin – the world’s number one cryptocurrency – as a “halving”. This is a clever feature built into the Bitcoin network that’s meant to keep the digital asset scarce and, therefore, valuable.
Discover everything you need to know about Bitcoin halving, including how it works, when and how often it happens, and what it means for the price of Bitcoin.
Bitcoin halving is when the rewards given to miners for successfully mining Bitcoin are reduced by half.
Bitcoin mining involves solving a complex mathematical problem known as a ‘hash puzzle”. Essentially, miners compete to find the solution that adds a new block of transactions to the blockchain. For their troubles, they’re rewarded with freshly minted Bitcoins, plus any transaction fees paid by users for the transactions in that block.
When Bitcoin was first created, the block reward was set at 50 BTC. Following each halving event, this reward goes down by half. As of the last halving, which happened in 2020, miners get 6.25 BTC for each block they successfully add to the blockchain.
Bitcoin halving occurs every 210,000 blocks. It takes an average of 10 minutes to mine a single block, so a halving usually takes place once every 4 years.
The first halving happened on 28 November 2012, when the block rewards were slashed from 50 to 25 BTC. The second, third and fourth halvings occurred on 9 July 9 2016, 11 May 2020 and 19 April 2024, reducing the rewards to 12.5 BTC, then to 6.25 BTC and to 3.125 BTC, respectively.
Bitcoin halving will continue until all of the 21 million available Bitcoins are mined, which is expected to happen around the year 2140. At the time of writing, approximately 19 million Bitcoins have been mined and are in circulation.
The next Bitcoin halving event will happen sometime in 2028. This halving will see the block rewards for miners go down from the current amount of 3.125 BTC to 1.5625 BTC.
Reducing the rewards that miners get for validating new transactions and adding them to the blockchain slows down the rate at which new Bitcoins are generated.
For example, if each block resulted in the creation of 12.5 Bitcoins, these become 6.25 Bitcoins post-halving. This means that fewer Bitcoins are added to the overall supply as time goes on.
Halving directly impacts miners’ profitability, with their potential earnings from mining new blocks decreasing overnight. The decreased profits could force the less efficient ones out of the market.
There’s often a heightened amount of media and public attention on Bitcoin in the run-up to a halving. This can drive up the asset’s price.
The halving event itself further tightens Bitcoin’s supply. According to the basics of supply and demand, this can fuel a further price increase, particularly if demand remains steady or rises. We’ve seen previous halvings spark a significant increase in Bitcoin’s value.
For example, the first Bitcoin halving in 2012 saw its price rise from $12 to over $1,200 in a span of a year. The second halving in 2016 followed a similar pattern, with Bitcoin’s price surging from around $670 to $2,550 a year later. The halving before the most recent one, which took place in 2020, triggered a Bitcoin bull run that eventually peaked at almost $69,000 in 2021. It’s too early to tell the true impact of the most recent halving that occurred in April 2024.
It’s important to note that, while past halvings have resulted in a bull market for Bitcoin, saying this is purely because of the halving is an oversimplification of the situation. Other factors – like regulatory changes, institutional adoption, and broader financial market trends – can also affect Bitcoin’s price.
Bitcoin halving isn’t just for show. It’s a deliberate mechanism programmed into the Bitcoin network. It’s there to create a self-regulating system that mirrors the scarcity and hard cap of precious metals such as gold.
Bitcoin’s anonymous creator, Satoshi Nakamoto, designed halving events to regulate the rate of new coin generation. The ultimate goal is to counteract inflation and preserve Bitcoin’s purchasing power.
This built-in scarcity is one of the main features that differentiates Bitcoin from both fiat currencies, which lose a percentage of their purchase value each year to
inflation, and other cryptocurrencies that have an unlimited supply, like Dogecoin.
Absolutely. Staying in the loop about Bitcoin halving is crucial for several good reasons and for different groups of people.
Knowledge of an upcoming halving can inform strategies about buying, holding, or selling Bitcoin. As mentioned, Bitcoin halvings have historically been associated with upward price movements. This presents an opportunity for gains. Just remember that past results don’t necessarily guarantee future success.
The awareness of when a halving will occur allows miners to plan for decreased block rewards. They can assess whether their operations are likely to remain viable and what adjustments (if any) they need to make to maintain profitability.
Bitcoin halvings are a key event in the crypto calendar. They tend to generate a lot of excitement and speculation, but their real impact lies in making sure Bitcoin’s value continues to increase over time due to the decrease in supply.
For crypto investors or enthusiasts, there’s potential to profit from this event, given the historical tendency for Bitcoin’s price to rise in its aftermath.
However, it’s important to remember that the crypto market is notoriously unpredictable. Past performance doesn’t guarantee future outcomes.
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