‘Not as bad as it sounds’: What you should know about Bitcoin’s halving

The idea of having your money sliced in half is enough to send even the richest man into panic mode. So, it’s no surprise that social media was rife with speculation in the days leading to Bitcoin’s halving.

Bitcoin’s halving event, which occurs every four years, took place on Saturday.

Despite the negative connotation attached to ‘halving’, the concept is not as bad as it sounds.

Speaking to The Citizen, Luno country manager, Christo de Wit debunked some myths around Bitcoin’s long anticipated event.

“Even though the connotation with the word ‘halving’ sounds quite negative that things are being cut in half, it has nothing to do with the actual value of Bitcoin – but more related to the way that Bitcoin is being generated.”

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What is halving?

When halving takes place, the rate at which new bitcoins are released into circulation is cut in half.

“For the miners who validate transactions on the blockchain, this halving event will see their bitcoin reward cut in half from 6.25 to 3.125 bitcoins per block. Less new bitcoin means less supply,” de Wit said.

“It’s part of a mechanism to prevent the inflationary impact that would be caused by releasing the total supply (which is capped at 21 million bitcoin) too quickly, with the last bitcoin to be mined around 2140.

“It’s a positive move because it controls the amount of Bitcoin supplied in the market – which I think is a positive move.”

Does that mean my Bitcoin will half in value? “Not at all, it has nothing to do with that.

“What it actually means is that it is making your Bitcoin a scarcer asset, similar to how a commodity like gold is a scarce resource – putting further controls into that blockchain.”

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Previous patterns

Previously, Bitcoin prices shot through the roof in the months following the halving event – “reaching an-all-time-high”.

Reflecting on the past, de Wit noted that when the first halving took place in 2012, bitcoin was priced at just over $12.

“After the first halving, the price of bitcoin shot up from $12 to around $1 000 by the end of 2023. The second halving event happened on 9 July 2016 when bitcoin was valued at around $640. By July 2017, it had risen to $2 550.”

“The third and most recent halving took place on 11 May 2020, when Bitcoin traded for about $8 750. Within a year, Bitcoin reached approximately $62 000.”

‘No guarantees’

The crypto expert however noted that this year was slightly different.

“Previously, Bitcoin reached an all-time high in the months after the halving cycle, this year we saw that in March, Bitcoin already broke through its previous record,” de Wit told The Citizen.

“That has never happened. Never has Bitcoin in the weeks just before the halving, surpassed its previous all time high,” he noted.

Nonetheless, he said it was still early to tell where the chips will fall after this year’s halving event.

“There are no guarantees and it is anyone’s guess whether the price will drop, rise or maintain after the April halving,” de Wit said.

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