Bitcoin Halving: Everything You Need to Know in 5 Minutes

Matthew Lam  May 07, 2020 18:30  UTC 10:30

3 Min Read

Bitcoin Halving: What and Why

In May 2020, Bitcoin is expected to experience its third halving in history. Bitcoin halving refers to the halving of Bitcoin block rewards, which occurs once every 210,000 blocks created (approximately every 4 years). Block reward refers to the amount of Bitcoin received by miners after they successfully validate a new block.

The rationale of Bitcoin halving stems from the currency design of Bitcoin. In the email thread between Satoshi Nakamoto and Mike Hearn, Nakamoto suggested that the total supply of Bitcoin is capped at 21 million. This is opposite to the inflationary nature of fiat currencies in which their supply is controlled by central banks.

Figure 1: Snapshot of Bitcoin Network 
Source:, Data as of May 7 2020

It is expected that all Bitcoins will be mined approximately by the year 2140 based on the following protocol design of Bitcoin:

1)     The target of 10-minute block intervals;

2)   Bitcoin halving mechanism; and

3)    Block reward starts with 50 and reaches 0 after continuous halving events.

Figure 2: Bitcoin Inflation vs Time

When Bitcoins in circulation reach its maximum supply, miners will no longer receive block rewards and only receive transaction fees from users as rewards. It is noteworthy that Bitcoin’s maximum supply can be changed if the changes are approved by the economic majority.

Implication of Past Bitcoin Halvings

Bitcoin block rewards started with 50 since its inception in 2009. Bitcoin experienced two halvings in 2012 and 2016 which the current block reward is 12.5 BTC. The block reward will be halved as 6.25 BTC after the third halving.

Figure 3: Bitcoin Halving Schedule
Source: Blockchain.News Data

What does Bitcoin halving mean for traders, miners and mining manufacturers?


The past Bitcoin halvings have been indicated as a positive signal to Bitcoin price. In theory, assuming Bitcoin demand stays constant, as each Bitcoin halving slows down the issuance of Bitcoin, Bitcoin in circulation will become scarcer over time and the scarcity drives up the Bitcoin price.

The Bitcoin community was unaware of the impact brought by the first Bitcoin halving in 2012, and the Bitcoin price rose almost 80x a year after (See Figure 4). The 2016 Bitcoin halving was highly anticipated by the community and the price rise was less substantial than the first halving.

Figure 4: Changes in Bitcoin Price after First Bitcoin Halving
Source: Fitzner Blockchain in Medium

Figure 5: Changes in Bitcoin Price after Second Bitcoin Halving
Source: Fitzner Blockchain in Medium

The impact of third Bitcoin halving on price is uncertain as it can be driven by the following factors (See Figure 6).

Figure 6: Possible Key Drivers on Bitcoin Price at 2020 Bitcoin Halving
Source: Blockgeeks, Blockchain.News Data


Miners will receive 50% less Bitcoin block rewards after each halving. From the previous Bitcoin halvings, Bitcoin hashrate and mining profitability resulted in an initial drop and recover after a few months (See Figures 7 and 8).

Figure 7: Bitcoin Halving on Hashrate

Figure 8: Bitcoin Halving on Mining Profitability (USD Day for 1TH/S)

The hash rate of Bitcoin hovers near all-time high (123.28m TH/S) and currently stands at 119.472m TH/S. Network difficulty increased 1.4% on May 5 and reached 16.105 t. For the third Bitcoin halving, Bitmex predicted that the hashrate may decline by 30-35% after the halving.


Figure 9: Total Hash Rate of Bitcoin ahead of 2020 Bitcoin Halving

Mining Manufacturers

Mining manufacturers usually release new mining models ahead of Bitcoin halving, which improved efficiency enables miners to optimize their earnings. For example, Bitmain announced a new Antminer S19 and S19 pro in February. As the main competitor of Bitmain, Canaan Creative announced its Bitcoin miner Avalonminer A10 in late March.

Image via Shutterstock

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