What is bitcoin halving and how will it impact its price? | Future Focus

On this week's episode of Yahoo Finance Future Focus, our host Brian McGleenon discusses the impact of this month's bitcoin halving event. The Bitcoin halving, occurring approximately every four years, involves a reduction in the number of bitcoins rewarded to miners, creating scarcity and potentially impacting the cryptocurrency's price. With the block reward dropping from 6.25 to 3.125 BTC per block, investors are anticipating how the market will respond. Past halving events have often preceded significant price increases, highlighting the fundamental principles of scarcity and decentralisation inherent in bitcoin. But, while the halving presents opportunities for investors, it's essential to approach bitcoin investment with caution, given its inherent volatility and unpredictable nature.

Trascrizione video

[MUSIC PLAYING]

BRIAN MCGLEENON: Welcome to Yahoo! Finance Future Focus. Now the Bitcoin network has just experienced another halving event. But what exactly is it, and how might it impact the price of Bitcoin?

The Bitcoin halving is a significant event in the world of cryptocurrencies that occurs approximately every four years. And it's a fundamental part of Bitcoin's design. Bitcoin mining involves a decentralized network of validators who verify all Bitcoin transactions. They're rewarded with Bitcoin for their efforts.

After each halving, the number of new Bitcoin issued as a reward to miners for validating blocks in the blockchain is halved. So, after the most recent halving, the mining reward has decreased from 6.25 Bitcoin down to 3.125 Bitcoin.

Now, why does this matter? Well, Bitcoin has a finite supply. There will only ever be 21 million Bitcoin. Currently, just over 19 million have been mined, leaving less than 2 million left to be created. So this reduction can lead to a supply crunch for Bitcoin, potentially causing its price to appreciate.

And this month's halving is different from prior halvings as it comes after the mainstream acceptance of Bitcoin as a legitimate asset after the approval of multiple spot Bitcoin exchange traded funds in January. So if the economic theory of supply and demand holds true-- which historically for Bitcoin, it has-- Bitcoin prices could increase in response to the supply shock caused by the recent halving event.

The first Bitcoin halving occurred in November 2012. And since then, there have been three more-- in July 2016, May 2020, and now, in April 2024. The reward or subsidy for mining started out at 50 Bitcoin per block when Bitcoin was first released in 2009. The amount has dropped in half each time a new halving takes place. For instance, after the first halving, the reward for Bitcoin mining dropped to 25 Bitcoin per block.

Now, the last halving will occur in 2140. And at that point, there will be 21 million Bitcoin in circulation and no more coins will be created. From there, miners will just be paid with transaction fees. Now remember, this doesn't constitute financial advice, and it's essential to approach Bitcoin investment with caution.

While past performance may indicate trends, it's not a guarantee of future results. Thanks for joining us.

[MUSIC PLAYING]