The cryptocurrency market is a rather specific field with a large number of terms unfamiliar to beginners. One of the key concepts in this space is halving. This mechanism indirectly determines the behaviour of the crypto market as a whole and of individual cryptocurrencies in particular. In this article, we will examine what halving is, which crypto assets it applies to, and also find out how halving can be used for profit and investment planning.
Halving is not unique to Bitcoin; however, to understand this mechanism better, we will start with Bitcoin itself.
What is Bitcoin halving 
As we know, Bitcoin runs on the PoW (proof of work) algorithm. In other words, the integrity and operability of the entire Bitcoin network are ensured by miners by adding computing power and connecting new devices (ASIC miners) to the network. With each new block mined, miners receive a certain amount of BTC as a reward.
So, halving — is a mechanism that halves the miners’ reward for a block found. It occurs every 210,000 blocks found, or approximately once every four years. This process is expected to end in 2140 after the last, 21-millionth, Bitcoin is mined.
Why Bitcoin halving is needed
By its nature, Bitcoin is a deflationary asset. This is due to the fact that no more than 21,000,000 BTC can be mined on the network. With each passing year, as cryptocurrencies are adopted by society, demand for them naturally increases.
Under the influence of halving, and due to the limited supply of the asset itself, the supply of Bitcoin on the market decreases, and since the crypto market, like any other, is subject to the law of supply and demand, the price of a cryptocurrency with constantly growing demand tends to rise.
That is, halving is a natural mechanism for regulating the pricing of “digital gold”.
Bitcoin (BTC) halving dates and chart
On 31 December 2008, Bitcoin’s technical document (the white paper) was published, describing the principles and conditions for the operation of the entire network. The first block was mined in 2009 by Satoshi Nakamoto himself, for which he received a miner’s reward of 50 Bitcoins. In the first four years of Bitcoin’s existence, 50 BTC were mined for each block found.
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2012
The first Bitcoin halving took place on 28 November 2012, which reduced the miners’ reward to 25 Bitcoins per block; the BTC rate began to rise a few months after the halving and reached 1,163 US dollars. After such a “pump”, the market corrected, and over the next two years the price of Bitcoin fell to $152 per coin. This was the first growth cycle of Bitcoin and the cryptocurrency market.
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2016
The second halving occurred on 9 July 2016. At the time of the halving, the price of Bitcoin was 670 US dollars. The number of BTC received per block was halved again — this time from 25 to 12.5 BTC.
Over the course of several months, the price of the first cryptocurrency rose, and by the end of 2017 it was almost 20,000 dollars per coin. In line with the pattern of previous years, the BTC price then fell over the following year to $3,122.
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2020
The third — but by no means least significant — halving occurred on 11 May 2020. The reward to miners for each new block mined decreased from 12.5 to 6.75 BTC. At the moment of the halving, the price was 8,700 US dollars per coin.
A great deal of attention was focused on this event, as just a few months earlier Bitcoin had plummeted to $3,800 amid coronavirus panic. 12–13 March 2020 became a “black swan” for all markets without exception. The cryptocurrency market reacted particularly sharply to the global economic collapse.
Contrary to established practice, at the moment of the halving itself, and for several weeks afterwards, the BTC price did not rise but remained roughly at the same level. However, by September the price of Bitcoin began to soar, and in 2021 it exceeded 50,000 US dollars. A couple of months later, Bitcoin set a price record for those years at 69,000 US dollars per coin.
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2024
The fourth halving is expected in April 2024. Many analysts forecast the price of Bitcoin in the range of 400,000 to 1 million dollars, by analogy with previous halvings and subsequent cycles. Already, Bitcoin is breaking its own records, and as of March 2024 it is worth more than $73,000.
Halving Litecoin (LTC)
Not only Bitcoin is subject to the concept and mechanism of halving. Litecoin also periodically “halves”.
To understand how halving works in Litecoin, it is necessary to examine how this cryptocurrency differs from Bitcoin:
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Issuance: the number of coins that can be mined by Litecoin miners is limited to 86 million.
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Block generation frequency: for Litecoin it is 2.5 minutes, for Bitcoin — 10 minutes.
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Transaction speed: the Litecoin blockchain handles up to 56 transactions per second, the Bitcoin blockchain — 3–7 transactions per second. Confirmation of transactions in Bitcoin takes 10 minutes, whereas in Litecoin it is four times faster — 2.5 minutes.
Network fees on Litecoin are many times lower than fees on Bitcoin.
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2015
The first halving of the LTC miners’ reward took place on 8 August 2015 and decreased from 50 LTC to 25 LTC. By that time, 50% of Litecoin’s total supply had already been mined.
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2019
The second halving occurred on 5 August 2019 at block #1680000 and further reduced the miners’ reward per block to 12.5 LTC.
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2023
The third halving occurred at block #2520000 on 2 August 2023. By itself, Litecoin’s halving did not have a strong effect on the LTC price. This is because the entire crypto market largely tends to follow the direction of Bitcoin’s price movement.
However, if a halving falls within a bear cycle (decline) — its real impact on price will be insignificant and short-lived.
Halving Ethereum (ETH)
Halving, in the classical sense of the term, is not entirely applicable to a coin like Ethereum (ETH). Such a function was not included in Ethereum’s white paper, and ETH issuance is not capped. However, there has been some reduction in rewards.
Proposals to improve the operation of the network are usually adopted in hard forks. These are major updates that introduce positive and necessary changes to the network’s operation. A hard fork can stipulate a reduction in the reward for mined blocks.
Halving Dates
The first hard fork on 16 October 2017, called “Byzanthium”, reduced the reward from 5 ETH to 3 ETH.
The second hard fork “Constantinople” on 28 February 2019 reduced the reward from 3 ETH to 2 ETH.
These reductions in Ethereum ended there, as in 2022 it moved from mining (PoW algorithm) to staking (PoS algorithm), and the size of rewards — for validators rather than miners — began to depend on the quality of block and transaction verification, as well as the amount of gas spent by blockchain users.
How to use halving to make money
As can be seen, halving creates ideal conditions for cryptocurrency prices to rise. There is also a clear dependence of the value of altcoins on the Bitcoin price, and we can observe how, after growth in the main crypto asset, it pulls other cryptocurrencies up with it.
Halving can be regarded as a catalyst for a new cycle of growth in cryptocurrency prices. The main advantage of earning due to Bitcoin’s halving lies in the fact that this event always causes increased volatility, and in 2024 another cycle of growth in the cryptocurrency market is taking place.
Conclusion
From the above, it becomes clear that Bitcoin’s halving — is a deflationary mechanism designed to regulate the market supply of Bitcoin. Despite cryptocurrencies being considered risky, with a competent approach and proper analysis, one can quite feasibly make money on events associated with halving.
