Bitcoin Halving: Understanding the four-year price acceleration

Bitcoin halving is one of the most critical moments in the cryptocurrency calendar. Approximately every 210,000 blockchain blocks—about four years—the reward for Bitcoin miners is automatically halved. This pre-programmed event regularly sparks discussions among investors, as it fundamentally alters market dynamics.

The technical mechanism: How exactly does the halving work

In the Bitcoin network, specialized miners validate transactions through proof-of-work calculations. For each successfully added block, they receive a reward from newly generated Bitcoin and transaction fees. Since Bitcoin’s inception in 2009, this automatic reward has been reduced multiple times:

• 2012: First halving (from 50 to 25 Bitcoin per block)
• 2016: Second halving (from 25 to 12.5 Bitcoin)
• 2020: Third halving (from 12.5 to 6.25 Bitcoin)
• April 2024: Fourth halving (from 6.25 to 3.125 Bitcoin)

This reduction occurs automatically in the code—without human intervention. Miners now receive about 450 new Bitcoin daily instead of the previous 900, significantly tightening the supply side.

Why Bitcoin needs a deflationary concept

The halving is not a coincidence but a core part of Bitcoin’s design. The cryptocurrency is limited to a maximum of 21 million coins—a synthetic scarcity that traditional currencies do not have. Without regular halvings, the annual inflation rate would decrease much more slowly. Through the halving model, however, it drops in noticeable jumps: after the April 2024 event, Bitcoin’s inflation rate will fall below 1 percent per year for the first time.

By 2028, over 20.3 million Bitcoin are expected to be in circulation—about 97 percent of the total supply. This programmed scarcity fundamentally differentiates Bitcoin from state-issued currencies and makes the asset attractive to investors seeking protection against currency devaluation.

Consequences for miners and network security

The halving presents a significant challenge for Bitcoin miners. Since the block reward accounts for about 95 percent of their income, their profits practically halve overnight. Unprofitable mining operations must cease, leading to consolidation—larger, more efficient providers take over.

A risk: if mining hash power drops too much, network security could suffer. However, all previous halvings have shown that the network adapts. Additionally, transaction fees may partially compensate for the reduced block rewards—a trend already visible through Bitcoin Ordinals.

Market effects: Scarcity drives price increases

Economically, the logic is simple: with demand remaining constant and supply halved, prices tend to rise. Historically, every Bitcoin halving has led to long-term significant price increases. The halving cycles follow a recurring pattern—initial euphoria, price decline, then accumulation with steadily rising valuations.

2024 was remarkable: Bitcoin reached new all-time highs before the halving—a novelty in Bitcoin history. Media attention and institutional activity accelerated the price development. However, it remains unclear whether these patterns will repeat in future halvings, as market conditions continue to tighten.

Investment approaches: Two different strategies

Long-term holding: HODLing through halving cycles

The classic strategy is to buy and hold Bitcoin over multiple halving periods. This approach relies on the structural scarcity and deliberately ignores short-term volatility. It requires psychological resilience—Bitcoin can lose 50 or 70 percent—but is worthwhile for investors with patience and appropriate risk tolerance.

Short-term trading: Trading around the event

Risk-tolerant traders aim to profit from increased volatility. They buy before the halving and sell after steep gains. This approach is highly risky—the timing is extremely difficult, and many external factors influence Bitcoin’s price. Even experienced professionals often fail.

Looking ahead: The 2028 halving

The next Bitcoin halving is expected to occur in 2028 and will reduce the block reward to 1.5625 Bitcoin. Until then, institutional adoption, Bitcoin ETFs, and innovative use cases will shape market dynamics. Transaction fees could also gain importance—a potential security source for miners after the halvings.

Conclusion: Halving as a structural price driver

Bitcoin halvings are central market events that reinforce scarcity and promote long-term upward price trends. They offer both opportunities and risks for investors. The programmed scarcity favors Bitcoin’s long-term price increase, but short-term developments remain unpredictable. The 2024 halving differed fundamentally from previous events—Bitcoin ETFs, institutional involvement, and a changed interest rate environment complicate forecasts based on historical patterns. For retail investors, it remains crucial: only invest capital that can be lost, and realistically assess personal risk tolerance.