Inflation & price

The Bitcoin Halving plays a crucial role in the regulation of monetary inflation within the Bitcoin ecosystem. This is done by halving the amount of new bitcoins that are added to the circulation and made available for sale on the market. This significant reduction in the new supply can, under circumstances where demand remains stable or increases, lead to an increase in the Bitcoin price. This is due to the fundamental economic principles of supply and demand, whereby a decrease in supply with a constant or rising demand often results in a higher price.

Bitcoin's monetary inflation policy is clearly set out in a predetermined schedule (these rules are all set in the source code). This diagram illustrates the decreasing amount of bitcoin that is generated daily, whereby in the early years of Bitcoin, after each successful block mining, 50 new bitcoins were created and put into circulation (every 10 minutes, +/- 7,200 bitcoins per day). This quantity is periodically and systematically reduced, which leads to an increasing scarcity of Bitcoin. This emphasizes the designed scarcity of Bitcoin and supports the idea that Bitcoin can be a stable assets in the long term.

There are various opinions among analysts about the effect of the Bitcoin Halving on the market price. Some claim that the halving will have a positive effect on the price of Bitcoin because of the reduced supply and the increasing scarcity, which could influence the price upwards. The logic behind this is that, with fewer new bitcoins that are created and the persistent or growing demand, the price should of course rise to meet demand. On the other hand, there are also arguments that suggest that the halving has little or no direct impact on the price. This view is based on the efficient-market hypothesis, which assumes that all known information has already been processed in current prices. Since the timing and the consequences of the Halving are well known in advance, market participants could adjust their investment strategies and decisions accordingly, so that any price changes have already been calculated before the Halving actually takes place. However, the past has shown that the market price has risen wide every time after a halving , but as always, past events offer no guarantee for the future.

Maximum of 21 million bitcoins

A crucial feature of the Bitcoin Halving is the limitation of the maximum range of bitcoin to 21 million. This maximum is built into the Bitcoin protocol by means of a mathematical formula, with which Bitcoin distinguishes itself from traditional Fiatralutas that can be subject to inflation due to unlimited money creation. The calculation of the total number of bitcoins that will eventually be in circulation is based on a series of factors that form the core of the underlying source code of Bitcoin. This formula takes into account the number of semi -detangations that will take place in total according to the protocol (32), the frequency of the semi -detaches (every 210,000 blocks), the initial remuneration of 50 bitcoins per Germined block, the number of to date completed semi -detached ( i) , and the semi -detached factor of 2. These components work together within the formula to ensure the maximum range of 21 million bitcoins, a unique feature that contributes to the deflatoir nature of Bitcoin.

The first halving in November 2012 marked an important moment in the history of Bitcoin by reducing the reward for mining a block from 50 to 25 bitcoins. Subsequently, in July 2016, the reward again halved to 12.5 bitcoins per block during the second halving . In May 2020, the subsidy reduced from 12.5 to 6.25 bitcoins per block. The most recent halving took place in April 2024, in which the reward was further reduced to 3,125 bitcoins per block. This systematic reduction of the block remuneration and the resulting limit on the total number of bitcoins contributes to the absolute scarcity of Bitcoin. The concept of scarcity is fundamental for the value perception of Bitcoin, similar to precious metals such as gold. This scarcity, combined with the increasing acceptance and the use of Bitcoin, has potentially an upward pressure on the price. However, it is important to acknowledge that, although the maximum offer is a fixed fact, the market price of Bitcoin is influenced by a multitude of factors, including market sentiment, regulations, and technological developments.

The influence of the halving on miners and network security

Wanneer de beloning voor het minen van een nieuw blok plotseling halveert, kan dit directe gevolgen hebben voor het financiële rendement van mining bedrijven. Especially for miners who work with less efficient hardware or at higher energy costs, this reduction in reward can lead to a decrease in profitability, which may be forced to stop their mining activities. This potential for reduced profitability can also affect the general security of the Bitcoin network. However, the computing power and therefore the general security of the Bitcoin network have grown enormously in recent years and the network has never been safe as today.

Ultimately, it appears that the Bitcoin Halving mainly stimulates innovation within the mining industry, since miners are looking for more energy-efficient solutions and more advanced hardware to maintain or improve their profitability. mining in the long term and contribute to a more robust and safer Bitcoin network. Research by climate activist Daniel Batten shows, among other things, that more than half of the energy that Bitcoin Miners use is renewable energy (54.5% in 2023). This percentage has risen considerably in recent years.