The coming Bitcoin ‘halving’

by | Dec 2, 2019 | 0 comments

This article is intended for readers who have already acquired a certain level of knowledge in the field of Blockchain and cryptocurrencies. If the article seems indigestible, do not hesitate to choose another difficulty in the box below wink

Difficulty of the article:


What is a ‘halving’ ?

In the  crypto currency world,  mining is the process of  solving,, checking and recording  transactions in order to add a block and create  a new unit of the crypto coin. This type of blockchain   consensus mechanism is named ‘Proof Of Work’ (POW). This   processing operation is awarded and it is rewarding the miner who is validating (solving  and adding ) the block during a transaction. 

Reading   the original    ‘White Paper’ published  in 2009 by the Bitcoin’s  father, Satoshi Nakamoto, it is  mentioned that the process of bitcoins  creation is transparent and pre determined   at a certain growth that is defined by the protocol   So, the number of outstanding bitcoins to be created is limited  to 21 million (or more precisely to 20 999 999,9769). Following the mining of one block, 50 bitcoins have been generated  roughly every 10 minutes during the first 4 years of the crypto currency’s life , then, this number shifted to 25 BTC at November 28,  2012 and to 12,5 BTC since July 9, 2016. Every 210 000 blocks (roughly every 4 years) the reward for validating a new block is therefore lowering  and come down progressively ( see charts).

The Bitcoin Halving  or ‘Block Reward Halving’  is therefore the timing when the minor’s reward is divided by two.  It is also the event whereby the Bitcoin inflation* is instantly reduced  by 50%.  

The coming Bitcoin halving on the network


As defined by the protocol,  the next Bitcoin’s halving will take place and run automatically on the network, without any  stop. All the following blocks will be mined as the same manner as today, but the only difference after the coming halving is that miners involved in validating new blocks will be rewarded by only 6,25 BTC per block versus 12.5 today.

Next Bitcoin halving will take place in May 2020 (presumably the 27th)


What will be the consequences and do we have to expect a Bitcoin price increase before or during the halving ?

Like any asset  freely traded on the market, Bitcoin price is depending on Supply and Demand. As the  growth rate of new bitcoins creation is defined by the algorithm, known to all, only the demand is unpredictable. But the effects of this such mechanism will have many chances to be anticipated by the halving date, that is to say in the coming weeks and months. Direct effects of the halving should be reflected in the price and are two fold  


1/  anticipation effect 

2/  scarcity effect that comes from the crypto currency’s decreasing supply mechanism  

We have to look back now how did it go during the last two ‘halving’ :


Back looking previous Bitcoin halving 


During the first halving, November28,  2012, Bitcoin price realized a +1.7% increase that can be considered as negligible. However, during  the previous months (increase of 500% in 12 months) and the following,, the Bitcoin price has regularly climbed up to reach the well know top of  2013 (an increase from $13 to $260 over only 4 months and about +1700% in two year time !)


Before the second Bitcoin halving,  July 9, 2016,Bitcoin regularly increased  in ten months (+200%) but decreased just after the halving,  before seeing finally increase restarted one month later. In 2016, Bitcoin price  moved from $260€ to $860, and, in a 2 year time following the halving, the price trend was  strongly bullish (closed to 2900% !)


The third halving : what should we expect ?

Looking at the experiences of the  two previous halving, and at the market theory, we should expect a Bitcoin price increase that might occur  but rather during the phase before the event. Indeed,

Bitcoin decreasing  inflation* (‘monetary’ bitcoins creation  process) will have already been anticipated  by investors and will have already been priced by the market therefore.   

A substantial volatility  could come just before and during  the halving as Bitcoin is not really often  under the spotlight of major events (unlike with some crypto currencies or tokens of ‘early stages’ stories  or new developing projects) Halving is a major event for Bitcoin.


– Based on the two latest halving  experiences and on the classical market anticipation process, especially on ‘pre-announced’ events , it seems obvious that a ‘pre-halving’  bull trend phenomenon be priced progressively (or maybe quickly ) in the Bitcoin within the ‘end of 2019 to May 2020’ period (May is the month  during when this third halving occurs). That being said, following a big plunge of the Bitcoin price as for all crypto currencies in 2018 (-70% to -80%),  we don’t have to forget that BTC price has already increased by more than 140% in 2019 (the last is around $9000 at the time of writing this article)   

Many people consider Bitcoin as similar as a ‘digital precious metal ‘  because of its ‘scarcity’ characteristic. In both cases (Bitcoin and precious metal) ,  the limited outstanding monetary amount give them a ‘haven investment’ print that is very useful  to fight against the inevitable intrinsic value debasement of sovereign currencies . Those currencies (or fiats) are  however considered as ‘anchor’ values. –  

   Over a longer term and  given the intrinsic deflationist conception of  the crypto currency Bitcoin, we can ask the question about the apparent (mathematically) huge upside value potential.  We are now entering in the phase of low growth pace of new bitcoins creation (18 million out of the 21 million have already been mined  and at the next halving, more than 89% of the total bitcoins will have been created), but it will be in 2140 that the last remaining rewarded block  should be mined, with a reward of only one satoshi (0,00000001 BTC). But who, as a Bitcoin miner, would agree to allocate its computer power and spend  a large quantity of electricity consumption for a reward of only 1 satoshi ? Following the point when the last remaining block will have been halved, miners will not be rewarded anymore. A that time, they will only earn bitcoins through transactions costs. It means that transactions costs will be going to play a greater role. One of the other answer will also hold in the use of  Bitcoin in the future , but on top of that, the answer is also in the level of the price that Bitcoin will have reached , price that will be able to compensate the lack of reward. . 


  • * Bitcoin inflation  = 21 Million x Blocks mined  / Existing Money (MM)


About the editor…

A passion : Economics, behavioural finance and emerging digital assets

Yves started his career in the asset management in 1986 where he worked at different positions as manager of equity funds and diversified funds. at Crédit Commercial de France and later, at Barclays group in Paris. In 1998, he took the lead of equity funds and diversified funds, then of the whole fund management business at the French team of the Dutch Robeco group  before joining Natixis Asset Management in 2012 as Director of the Equity Investment business unit. Yves left Natixis AM in 2018 to start as an independant player for professional investors and corporates (advisor and fund raiser).

He likes to engages in sports that test his endurance like running and swimming, Yves is also fascinated by social sciences, and more specifically by history and economics. But this is the economics mechanisms behavioural aspect and the markets behavioural analysis that are a constant source of thought and discussion. Since few years, the blockchain issue and emergence of crypto assets is a new field of passion and opportunities for him.

Yves Maillot

Financial markets and asset management

Yves Maillot

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