May 12, 2020

Bitcoin Halving - A Historic Day

Justin Woodward, Tax Attorney

Justin Woodward
Crypto Tax Attorney

Bitcoin faces a technical event today known as the “halving.” The halving results in the amount of Bitcoin awarded to miners to be cut in half. Prior to the halvening the reward for successfully mining a block was 12.5 Bitcoins. That amount will now be reduced to 6.25 Bitcoins per successful block mined.

Roughly every four years Bitcoin experiences a halving event. Unlike fiat currencies that are managed by central banks that control monetary supply and inflation, there is no central bank that manages Bitcoin. The total number of Bitcoins that will ever be mined is capped at 21 million. There are currently just over 18 million Bitcoins in existence. Of those 18 million Bitcoins, approximately 4 million are lost and around 1 million have been stolen through various hacks such as the Mt. Gox breach. Of the remaining 13 million Bitcoins in circulation, approximately 5 million Bitcoin belong to around 1,600 holders, commonly referred to as “whales.” One of the whales is Satoshi Nakomoto, whose public address stores 1 million Bitcoins. This leaves 3 million Bitcoins left that have yet to come into existence, which will occur through mining.

Many Bitcoin enthusiasts believe that the known scarcity in supply is part of what makes Bitcoin valuable and protects against devaluation due to the predictable finite schedule. Prior to today, there have been two halving events in Bitcoin’s history that both resulted in subsequent bull runs for Bitcoin. There is speculation that the increase in scarcity from today’s halving event may yet again result in Bitcoin pricing gains. However, many traders have taken notice of the price raises from previous halving events and there is an outstanding question of how much of this current halving is already baked into the current price of Bitcoin. In the meantime, crypto enthusiasts are celebrating this monumental event that has only occurred three times in Bitcoin’s history.

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