Bitcoin, the first and most valuable cryptocurrency, is an entirely decentralized, deterministic computer network governed by code. Its value proposition is based on its supply being fixed and the economic law of scarcity. This particular digital asset is deflationary, as it has a fixed supply of only 21 million coins. This distinctive design attribute sets it apart from most fiat currencies, which are generally susceptible to inflationary forces. Bitcoin has been through three of these events, known as “halvings,” to date. These events happen approximately every four years and cut in half the rate at which new coins are produced, further increasing the scarcity of Bitcoin.
With the next halving predicted in 2028, investors and fans are closely watching Bitcoin’s fortunes. This post takes a look at what Bitcoin halving events mean, where the market stands today, and what may lie ahead.
The Mechanics of Bitcoin Halving
Bitcoin's protocol includes a mechanism that reduces the block reward, the number of new bitcoins awarded to miners for verifying transactions and adding new blocks to the blockchain. At first – when it all started in 2009 – miners were rewarded with 50 bitcoins for every block they mined. The first one took place in November of 2012, cutting the reward down to 25 bitcoins. The next two halving events came in July 2016 and May 2020. These occurrences happened to cut the block reward in half to 12.5 bitcoins and then 6.25 bitcoins, respectively. The last halving, on April 19, 2024, reduced the reward to 3.125 bitcoins per block.
The halving events are pre-programmed into Bitcoin’s code to regulate the supply of new coins entering the market. The next halving will occur in March or April of 2028. This event, known as a halving, will reduce the block reward to 1.5625 bitcoins. The decreasing supply of Bitcoin, coupled with continuing or increasing demand, pushes the price higher and higher. This opposite trend is most obvious in Bitcoin’s price action following past halving events.
Aside from earning transaction fees, with about 19.7 million bitcoins already in circulation, miners will continue to release the remaining coins slowly over the next hundred years. The last Bitcoin is expected to be mined sometime around the year 2140. After that point, miners will be forced to depend only on transaction fees for their earnings. This capped supply is a key aspect of Bitcoin’s value proposition. It truly does set Bitcoin apart from traditional currencies, which central banks can inflate at will.
Market Performance and Adoption
Before its latest halvings—on April 19, 2024—Bitcoin was valued at around $63,800. Since then, the price has rocketed up by close to 70%. This increase indicates the market’s anticipation of lower supply and possibly higher demand. This upward price trend is consistent with what we’ve observed following previous halving events. In fact, after those events, Bitcoin usually experienced substantial appreciation in the subsequent months.
Despite its growing popularity, Bitcoin has only been officially adopted as legal tender by two countries: El Salvador and the Central African Republic. In 2024, the approval of Bitcoin spot price ETFs represented a historic high point. This regulatory development, for the first time, allowed institutional investors and a greater number of retail investors to obtain exposure to Bitcoin through regulated investment vehicles. This newfound accessibility could help propel even more demand and increase its price as a result.
The reduction in mining rewards is driving up the economics of Bitcoin mining. Shortly after Bitcoin’s launch, it was possible to mine the cryptocurrency with standard desktop GPUs. However, as the network’s difficulty rose, miners quickly shifted to specialized hardware called application-specific integrated circuits (ASICs). These industrial machines are purpose-built for Bitcoin mining, providing up to 50 times the hash rate and energy efficiency. Since halving events lower the revenue that miners receive from block rewards, the pressure on miners to be as efficient as possible naturally increases.
Future Projections and Potential Scenarios
Just as Bitcoin’s price has soared, analysts and industry experts have made different predictions for Bitcoin’s future price trajectory. Standard Chartered, for example, recently forecast Bitcoin would be worth $500,000 by 2028. These projections are underpinned by assumptions including growing institutional adoption, a constrained supply and macroeconomic factors.
Halving events are key to these projections. Most importantly, they have a direct impact on the rate at which new bitcoins enter the market. If investors, institutions, and even nation-states suddenly begin competing for a limited supply of bitcoin, that dynamic will likely push prices higher as supply growth diminishes. We as crypto investors need to remember that the cryptocurrency market is inherently volatile. Many other factors—including regulatory developments, technological innovations, and global economic conditions—can affect Bitcoin’s price.
The long-term sustainability of Bitcoin’s mining network has been a point of contention. As block rewards continue to halve, miners will need to depend on transaction fees more than ever to operate their business. The ability of the Bitcoin network to generate sufficient transaction fees to incentivize miners will be critical for its continued security and functionality.
