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What is a Halving?

The word “halving” comes from the English word “half”. Halving occurs when miners’ block rewards are cut in half. The most important cryptocurrencies experiencing this phenomenon are Bitcoin and Litecoin, as their ecosystems are based on in a proof-of-work consensus mechanisms.

The mythology behind the halving takes into account important demand-supply factors. Digital currencies suffering from halving have a code that dictates that a specific amount of new coins mined will be cut in half every certain amount of blocks, until the rewards are zero, thus, no further coins could be mined. Taking the last explanation into account, is quite evident that halving is part of a deflationary model. After each halving, the value of mined coins rise significantly (in other words, less supply, more demand). The mechanism also ensure slowing down the block rewards.

Every cryptocurrency trader should have the halving concept clear as well as understanding its role in crypto’s price action. There is a proven positive correlation between halving events and price. In BTC, specifically. Major uptrends have followed the event. The last Bitcoin halving occurred in May 2020. Mining rewards were cut from 12.5BTC per block to 6.25BTC.

If we do the math, every 210,000 blocks, the amount of reward should experience a cut. According to the original BTC code specification, there can only be 64 halvings. When the last BTC is released, 21 Million coins are going to be circulating in the market, this number finite and will never be increased.

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