With the cryptocurrency landscape continually evolving and Bitcoin (BTC) gaining mainstream traction like never before, there has never been more curiosity and excitement about this exciting asset class. This is especially true as we approach the next Bitcoin halving – a pivotal event in the cryptocurrency world that significantly impacts both the issuance rate of new BTC tokens and, historically, its market value.

But what exactly is the Bitcoin halving, and why does it wield such power over the market? Understanding how the halving works is crucial for anyone looking to navigate this space successfully, and this blog aims to demystify what exactly the Bitcoin halving is, and explore the potential opportunities that accompany it.

What is the Bitcoin Halving?

To understand the halving we first need to understand how new bitcoins are produced. Bitcoin uses a system known as a Proof of Work consensus algorithm. All we need to understand about this is that it’s a race where people set up very powerful computers that compete to solve complex math puzzles every 10 minutes. Whoever solves the puzzle first is rewarded with new bitcoins. This is the process usually referred to as "mining."

However, there's a unique twist in the way Bitcoin was designed: approximately every four years, the amount of Bitcoin you receive for solving a puzzle is cut in half. This event is commonly referred to as the "Bitcoin halving."

The reason why this process occurs “approximately” every four years is because the rewards for mining a Bitcoin block is halved after 210,000 blocks are mined, rather than based on any external circumstance. This mechanism permanently reduces the rate at which new bitcoins are generated and ensures that the total supply of Bitcoin will never exceed 21 million coins.

The Fourth Halving: April 2024

The next Bitcoin halving event is expected to occur sometime in April 2024, and expectations are high. Previous halvings have led to significant rallies in Bitcoin's value and corresponded with transformative shifts across the broader cryptocurrency market.

The first halving in 2012, which reduced mining rewards from 50 BTC to 25, saw Bitcoin's price increase exponentially in the following year (up nearly 2000%). Similarly, the subsequent Bitcoin halvings in 2016 and 2020 preceded major bull runs, cementing the event's reputation as a catalyst for price surges. The fourth halving will reduce the block reward from 6.25 bitcoins to 3.125 bitcoins – and this supply shock is expected to have an immediate impact on the market.

Considering Bitcoin

This year’s Bitcoin halving will be the first to combine a known supply shock (i.e. the halving event itself) with a material demand shock (ETF approvals), and many believe this combination is likely to have a significant impact on the price of BTC.

The SEC's approval of 11 individual Bitcoin ETFs earlier this year revealed a regulatory willingness to integrate cryptocurrencies into the traditional financial ecosystem, and consequently played a crucial role in changing public perception towards cryptocurrencies. In other words, this move signaled a shift towards mainstream acceptance of Bitcoin, not just as a speculative asset or digital gold but as a legitimate component of diversified investment portfolios.

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Topper Is Your Gateway to Bitcoin

The upcoming Bitcoin halving, alongside the rapid development of the Bitcoin ecosystem, are important events in the continuing development of cryptocurrencies as a new asset class. By understanding their significance and using platforms like Topper, you can participate in the future of finance.

For those looking to do so, Topper offers a seamless fiat-to-crypto onramp. With user-friendly features, Topper makes purchasing BTC straightforward for beginners and seasoned traders alike. On top of that, you can execute crypto purchases using common payment options like Apple Pay and Google Pay, and choose from 200+ different cryptocurrencies if your interests extend beyond BTC.

Try Topper today.

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Before trading any crypto asset, it is important to understand the risks. This overview summarizes certain risks associated with this asset. No securities regulatory authority has issued an opinion regarding this asset, including an opinion that it is not itself a security and/or derivative.

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