How Bitcoin Controls its Supply
Author: Elle Miller
The bitcoin halving is coming in a couple of years. The event has been highly anticipated by the cryptocurrency community and investors alike and for good reason!
The cryptocurrency community knows that the next halving will be a huge milestone for bitcoin — but what exactly is it and why should we care?
Bitcoin halving refers to an event that occurs roughly every four years where the reward for mining new bitcoins is cut in half. This event was first introduced back in 2012 as part of Nakamoto’s original whitepaper, entitled Bitcoin: A Peer-to-Peer Electronic Cash System.
Unlike many cryptocurrencies or even cold hard cash, Bitcoin’s total supply is fixed and immutable. That means there will only ever be 21 million Bitcoin.
Right now, only 15 million BTC of the 19 million that have been mined are available. The disparity is because of all that have been lost because of an owner’s death or even as simple as lost private keys and passwords. Now, there’s only 2 million left to mine.
If you’ve ever taken an economics class, you would know that price is a function of supply and demand.
That’s why this event gets exciting!
One of the great things about Bitcoin is its scarcity. In theory, the reduction in the pace of Bitcoin mining will drive the increase of the price IF the demand remains the same.
“Bitcoin’s production scarcity is what defines its finiteness, and when reward goes down, supply is constrained,” says Chris Kline, chief operating officer of Bitcoin IRA. “Increasing demand at a time when supply is constrained has a positive impact on price, which can make bitcoin alluring to investors.”
Historically, it doesn’t go up immediately. Back in the halving of June 2017, BTC was trading at $660 and even went lower after a month. However, it reached a new all-time-high of over $20,000 by the end of year. That’s a 2,916% increase!
In 2024, the rewards will drop to 3.125 BTC for miners. This will be the fourth halving.
While there is no assurance that the price of Bitcoin will increase, it has proven to be successful in the last three halving events. Remember that the halving is typically surrounded by immense speculation, hype, and volatility, and how the market will react in the future is still unpredictable.
The debate continues whether or not we’ll see the same effect in the next two years.. One thing is for sure though, if it does go up, today might be the best price you can get BTC for.