The Halving Deep Dive

The Bitcoin halving was covered in Part 4 as a historical event. Here it’s worth understanding as a mechanism — because it shapes how long-term holders think about timing.

Every 210,000 blocks, the reward miners receive for finding a new block is cut in half. This happened in 2012, 2016, 2020, and 2024. Each time, the rate at which new Bitcoin enters circulation was permanently reduced.

The direct effect is on supply flow — specifically, the amount of newly minted Bitcoin that enters the market each day. Miners are major sellers; they produce Bitcoin and need to sell some to cover electricity costs. When the reward halves, miners receive fewer coins. If they sell the same proportion, fewer coins reach the market.

This creates a supply squeeze — assuming demand remains constant or grows. Less new supply meeting existing or rising demand should, in theory, push prices up. History suggests it eventually does, though with a lag of months.

What the halving doesn’t do: it doesn’t guarantee anything. Demand is the other half of the equation, and demand is driven by adoption, sentiment, macro conditions, and a thousand other factors the halving doesn’t touch.

Where the halving matters most for long-term thinking: it makes Bitcoin’s supply trajectory perfectly predictable. Every investor, every institution, every government in the world can calculate exactly how many Bitcoin will exist on any future date. No other asset offers this certainty.

That predictability — in a world of unpredictable monetary policy — is part of what gives Bitcoin its value proposition.

Tomorrow: stock-to-flow — what the model says and what it doesn’t.

— The Daily Bit