New bitcoins are issued by the Bitcoin network every block bitcoin minutes. For the first four years of Bitcoin’s existence, the amount of new bitcoins issued every 10 minutes was 50. Every four years, this number is cut in half.
The day the reward halves is called a “halving”. In 2012, the amount of new bitcoins issued every 10 minutes dropped from 50 bitcoins to 25. In 2016, it dropped from 25 to 12. Now, in the 2020 halving, it will drop from 12. What is the Significance of the Reward Halving?
The halving decreases the amount of new bitcoins generated per block. This means the supply of new bitcoins is lower. In normal markets, lower supply with steady demand usually leads to higher prices. Since the halving reduces the supply of new bitcoins, and demand usually remains steady, the halving has usually preceded some of Bitcoin’s largest runs. Note how the price has jumped significantly after each halving. Bitcoin Halving Chart In the image below, you can see Bitcoin’s inflation rate during each period. Each halving lowers Bitcoin’s inflation rate.