If you’re new(er) to the digital asset market, you may be confused when you hear that a bitcoin halving is imminent. This important event happens only once every four years(ish). So what’s all the fuss about?

What is the Bitcoin Halving?

While the available supply of fiat currencies can increase and decrease under the control of national central banks, the total supply of bitcoin is fixed and immutable. In essence, the only thing that “controls” the supply of bitcoin is what was originally written into its algorithm.

Bitcoin halving is an event that has occurred about every four years since its inception in 2009. Bitcoin halving directly impacts bitcoin mining, or the process by which transactions are verified on the blockchain and new bitcoins enter into circulation. By solving extremely complex mathematical equations, miners (computers) are rewarded with newly minted bitcoins, thus increasing supply. When a halving occurs, the bitcoin protocol cuts the number of bitcoins awarded to successful miners in half.

Why Does the Bitcoin Halving Occur?

The halving was included in bitcoin’s mining algorithm for the purpose of counteracting inflation by maintaining scarcity. Theoretically, the reduction in the pace of new bitcoin being awarded to miners leads to the price increasing even if demand remains the same.

Since there are a finite number of bitcoins that can be mined, lowering the available amount of new supply could lead to potential upward pressure on prices. With ~19.6 million bitcoins currently in circulation (out of the 21 million maximum supply), only 1.4 million are yet to be mined.

When is the Next Bitcoin Halving?

An interesting thing about bitcoin halving is there’s no set date for when the next halving will happen. The halving occurs after 210,000 blocks on the bitcoin blockchain have been filled with data. While this takes around four years to complete, the exact day cannot be accurately predicted until the event is relatively close.

According to Coinbase, the next bitcoin halving will occur around April 16th or 17th of 2024.

The bitcoin mining algorithm was created with a target of finding new blocks once every 10 minutes. While some blocks take exactly 10 minutes, some take more and some take less. This and only this affects the amount of time it takes to reach the next halving.

Halving events will continue about every four years until all of the 21 million bitcoins are mined. It’s estimated that this won’t happen until the year 2140. After all coins are mined, miners will rely solely on transaction fees as compensation for validating blocks.

When Did Previous Halvings Take Place?

When bitcoin was officially launched on January 3, 2009, the reward for each successfully mined block was 50 newly minted bitcoins. Previous halvings include:

Nov. 28, 2012 – block reward lowered from 50 to 25 bitcoins
July 9, 2016 – block reward lowered from 25 to 12.5 bitcoins
May 11, 2020 – block reward lowered from 12.5 to 6.25 bitcoins

The upcoming halving will reduce the reward for miners from 6.25 to 3.125 bitcoins.

Why I Believe the Bitcoin Halving is Important

The bitcoin halving may have major implications for its network, specifically for miners. As halving events continue to occur, they may result in consolidation, as individual miners and smaller operations leave the mining ecosystem or are potentially taken over by larger companies.

While no direct action is required by individuals currently holding bitcoin when a halving takes place, staying informed about the timing of the halving and the potential market impacts is always smart.

Alex’s Take

US Dollars haven’t historically been scarce.

The money supply was $15 billion in 1913 and is roughly $21 trillion today. Doing the math, dollars have increased by about 7% per year, which means the supply of dollars doubles about every 10 years.

After the next halving, 3.125 bitcoins per block would mean it would take bitcoin 119 years to double its supply.

• By 2040, the bitcoin mining process will only produce 28 bitcoin per day.
• By 2060, the bitcoin mining process will produce less than 1 bitcoin per day.
• By 2100, there will be only 1 bitcoin left to be mined–and it will take 40 years to mine.

US debt has been increasing by $1 trillion every 100 days, according to Bank of America.

If US debt continues to increase by 6.50% per year, we’re on pace to have $1.466 quadrillion in debt by 2086.

Reading the tea leaves: It’s likely that the US government will have to keep printing dollars and deflating your purchasing power.

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This material is intended for informational purposes only. It should not be construed as legal or tax advice, and is not intended to replace the advice of a qualified attorney or tax advisor. This information is not an offer or a solicitation to buy or sell securities. The information contained may have been compiled from third party sources, and is believed to be reliable.

Alternative investments – such as hedge funds and private equity/venture capital funds – are speculative and involve a high degree of risk. Likewise, the emergence of digital assets comes with its own speculative characteristics and involves a high degree of risk. Various digital assets have unique features, and the regulatory risk environment continues to change as governance requirements, rules, and lawsuits emerge. There may be material differences in the type of marketplaces available for digital assets, and there could be significant restrictions or limitations on withdrawing from or transferring these types of investments. Digital assets may incur higher fees when compared to traditional assets, and these expenses may offset returns.

Crossover Capital may not be able to independently verify digital asset valuations provided by institutions that hold or offer digital asset services. As a result, Crossover Capital will generally rely on information reported to it by third parties. As such, the information contained herein is for informational purposes. Clients should recognize that they may bear digital asset-based fees and expenses at the manager-level, as well as indirect fees, expenses, and performance-based compensation for digital assets. Spot bitcoin exchange-traded products were recently approved for listing and trading by the SEC. However, such approvals do not indicate SEC approval to use or invest in bitcoin. Clients should remain cautious and aware of the various risks associated with digital assets that have a value tied to bitcoin or other crypto related products.