On 11 May 2020, a bitcoin halving took place. Fortunately, investors knew it was going to happen and could plan for it.

But what is bitcoin halving (or halvening) and what are the investment implications?

What is bitcoin halving?

Every 10 minutes, bitcoin blocks are issued by the bitcoin network.

In the year 2140, the number of bitcoins in circulation will hit 21 million and stay at that number forever.

A bitcoin halving (or halvening) event is when the reward for mining one bitcoin block is cut in half, meaning miners receive 50% fewer bitcoins for verifying transactions. The number currently is 6.25.

A halving happens every 210,000 blocks, which is roughly every four years.

How does this happen?

In January 2009 when bitcoins were first issued, the number was 50.

In late-2012, it was halved to 25.

In 2016, it was halved again to 12.5 and in May 2020 it was halved to 6.25.

There’ll be another halving in 2024 when the bitcoin per block will be 3.125.

Why does Bitcoin halving happen?

Bitcoin halving reduces the supply of new bitcoins, which, with demand remaining roughly the same, should increase the value of the cryptocurrency.

The halving also cuts bitcoin’s inflation rate.

The incognito creator of bitcoin never fully explained why this schedule for the halving was chosen. It understood to be for even distribution.

How does it affect the value of bitcoins?

In most markets, a steady demand with an increasingly lower supply usually means an increase in price.

Previous halvings have been followed by bull runs with one bitcoin’s value significantly rising.

Before the halving in 2012, the price per bitcoin was US$12.35. Five months later, the price was $127.

In 2017, the price went from US$650.63 to US$758.81 during the same period.

In late 2017 it hit a high of US$19,783.

When is a good time to invest in bitcoin?

As with all investments, investors in bitcoin need to buy low and sell high.

The next bitcoin halving will happen sometime between February and June 2024, making the weeks leading up to it a potential time to invest.

At the time of writing, the price of one bitcoin was roughly US$9,000

After the 2018 crash, bitcoin dropped below US$4,000.

This makes investing a matter of timing and will always be a gamble.

In time, bitcoin will be rarer as more people buy the finite supply and bitcoins become harder to mine as more halvings occur.

Short-term loans with Lamna

When the opportunity comes up to invest in bitcoin and your money is tied up, you can get a fast and discreet loan from Lamna.

All you need is a valuable asset that can stand as collateral. No risk, no credit score and no lengthy applications or wait times.

We offer these loans against the value of a wide range of assets, from vehicles to jewellery.

For more information about using an asset to secure a short-term loan, contact us on 0330 341 1707 or simply complete and submit our online application form.