A bitcoin halving (sometimes ‘halvening’) is an event where the reward for mining new blocks is halved, meaning miners receive half as much bitcoins for verifying transactions. Bitcoin halvings are scheduled to occur once every 210,000 blocks – roughly every four years – until the maximum supply of 21 million bitcoins have been generated by the network.  

To understand what the ‘Bitcoin halving’ is, it’s important to understand what Bitcoin mining is.  

Simply put, mining is the process by which the Bitcoin network is secured and transactions are processed. Every day, people use vast amounts of computing power towards Bitcoin mining. The incentive behind Bitcoin mining is that ‘miners’ receive new Bitcoin for each block that is mined. A ‘block’ in the Bitcoin blockchain can be thought of as a page in a ledger book that contains a list of transactions. The miners verify and secure these transactions and a reward is released to the miner who successfully solves the block. This is known as the ‘block reward’.  

The reward needs to be sufficient enough to provide a strong incentive but also not too high as this would cause an oversupply, lowering the value of Bitcoin. The creator of Bitcoin, Satoshi Nakamoto, wanted Bitcoin to be self-sustaining, so he ensured that over time, mining would become more difficult and the rewards would be reduced to control the supply.  

Bitcoin halvings are important events for traders because they reduce the number of new bitcoins being generated by the network. This limits the supply of new coins, so prices could rise if demand remains strong. While this has happened in the months before and after previous halvings – causing bitcoin’s price to appreciate rapidly – the circumstances surrounding each halving are different and demand for bitcoin can fluctuate wildly.  

When is the next bitcoin halving?  

The next bitcoin halving is expected to occur in the week commencing 13 May 2020, when the number of blocks hits 630,000. It will see the block reward fall from 12.5 to 6.25 bitcoins. The exact date of the halving is not yet known as the time taken to generate new blocks varies, with the network averaging one block every ten minutes.  

Here you can find the exact predicted time: https://www.bitcoinblockhalf.com 

 Why does bitcoin halving increase the price?  

Note that there is no guarantee that halving will increase the price and that the expectation of a halving increasing the price can cause the price to decrease after the halving. So DO NOT INVEST BASED ON THIS KIND OF REASONING.  

But the reason people say that a halving will increase the price is simple:  

Say the newly-minted bitcoins are worth $200 million per month. And say the price of bitcoin is roughly constant. You have three things:  

People who mined bitcoins and are selling them. Let’s assume 85% of mined bitcoins are sold, so that’s $170 million per month.  

People who sold bitcoins they didn’t mine. Let’s call that $X million per month.  

People who are buying bitcoins. Every sold bitcoin must be bought, so this must be $170+X million per month.  

The price is constant. So this is steady-state.  

Now, say there’s a halving. Suddenly, the numbers change:  

People who mine bitcoins and are selling them are now 85% of $100 million per month or $85 million per month.  

People who sold bitcoins they didn’t mine are still $X million per month.  

People who are buying bitcoins are still $170+X million per month.  

Now, let’s look at buyers minus sellers: (170+X)-X-85 = 85. So we now have $85 million per month in buying over selling where we previously had equal buying and selling. So we would expect the price to go up.  

Why can it go down? If everyone thinks the price will go up after a halving, that means everyone wants to buy before a halving and many will want to sell after it. And, of course, everyone wants to buy first. So if you think a halving will raise the price, you’ll think it will raise well before the halving, so you’ll want to buy way before, meaning any price increase would be spread out and people might well sell into it. And all those people wanting to sell after the price goes up may start selling immediately, preventing the price from going up.  

Halvenings are usually priced in much before the event and last till much after the event, E.g 2012 halving happened first before the bull run that led to the price of 1200$. Similarly, the halving in 2016 happened which led to the bull run in 2017, I see it more as a catalyst to a bull run rather than, the price just increasing suddenly on the day of the event.  

The number of bitcoins mined per block simply decreases by half, which means electricity costs for miners to mine the same amount of bitcoin increases, so does the time to mine them.  

Price also works to an extent based on supply and demand, though either can be suppressed to any extent due to market manipulation and/or greed.  

Hence if it’s not the right time for its market cycle, the price might not increase in and around the halving period.