The Bitcoin algorithm is designed so that a halving occurs every time 210,000 blocks are added to the chain. This means it happens roughly every four years. At the current rate, the next halving is expected to happen on or around April 19th of this year.

This halving, which cuts the daily supply of newly minted coins by 50% is an event that's historically caused prices to soar. As the next halving rapidly approaches, investors are waiting to see whether this familiar pattern is repeated.

Bitcoin has already climbed 60% this year, reaching an all-time high of over $72,000 USD in March. This has been driven by investors flocking to newly launched ETF’s that allow them to buy Bitcoin in the form of shares on a stock exchange.

Every time a new block is added to the Bitcoin blockchain, the contributor is given some Bitcoins as a reward. This “block reward” initially consisted of 50 bitcoins but, due to a feature of Bitcoin’s code, that amount is cut in half approximately every four years.

Previous halvings saw the block reward cut to 25 Bitcoins, then to 12.5, then to the current allotment of 6.25. The halving set for April will see the reward cut to 3.125.

Who's adding these blocks to the Bitcoin blockchain in the first place?

Blocks are added by miners, which typically fall into three categories: retail (individuals with computers), industrial (often publicly traded, operating data farms), and mining pools (groups of miners who combine efforts over a network).

Theoretically anyone can be a miner and eligible for rewards. These rewards are issued about every 10 minutes, but unless you have access to powerful computers known as ASICs (Application-Specific Integrated circuits), there is little chance of receiving notable rewards.

Previous halvings

Nov. 28, 2012, July 9, 2016 and May 11, 2020.

Future halvings

The reward will continue to diminish until it reaches one satoshi, equivalent to 0.00000001 Bitcoin.

Bitcoin’s source code will only ever produce 21 million coins. The majority, 19.7 million have already been mined. The process is expected to continue until the year 2140, but the amount getting mined every year is becoming more and more insignificant.

Why does the halving occur

Bitcoin’s founder, Satoshi Nakamoto, set out the halving mechanism in the currency’s 2008 white paper. Halving’s are intended to keep Bitcoin inflation-resistant by slowing the rate at which new coins are created. For instance, currently 328,500 Bitcoins are created each year, which will soon drop to 164,250.

What does this mean for Bitcoin’s price?

So far, every halving has coincided with a bull run. Following the previous halving’s, the price climbed 8,760% to $1,152, then 2,570% to $17,760, and finally 594% to $67,549 by the following year.

So, is it a sure thing this time around?

Absolutely not. A possibility, yes, but there is no such thing as a sure thing in the markets. Things are also unfolding in a new way this time around, thanks to the new ETF’s. The cycle leading up to the halving is already performing different from the previous three halving’s, with the all-time high happening two months before the event. Then there’s the impact of rising production costs, which could reach about $50,000 USD after the halving.

History does not always repeat itself, and there is a good chance that we could see a drop in price for the first time ever after a halving event. If there is a drop, it will most likely be short lived and will only effect investors who are buying into Bitcoin for a quick profit, based on the halving event.

The positive long term outlook for Bitcoin stays intact and factors such as inflation and economic instability, will continue to increase interest in Bitcoin as an alternative asset, therefore influence its price.