The Bitcoin network underwent its fourth halving event on Friday evening, a milestone event that occurs around every four years. This programmed adjustment, coded into Bitcoin’s protocol by its pseudonymous creator, Satoshi Nakamoto, serves to regulate the issuance of new bitcoin, ensuring scarcity and preventing inflation.
During the Bitcoin halving, which occurred at 8:10 p.m. New York time, the reward for miners validating transactions on the Bitcoin network was slashed in half, from 900 BTC to 450 BTC per day. This reduction in mining rewards is aimed at maintaining the eventual hard cap of 21 million bitcoin, a key feature of Bitcoin’s design to safeguard its value over time. Notably, currently, there are around 19.6 million BTC in circulation.
Bitcoin Halving: Impact on BTC Prices
The halving is a highly anticipated event within the bitcoin community, as it often triggers market speculation and volatility. However, this time around, the price of bitcoin remained relatively stable around the $64,000 mark following the halving. It might suggest that the event had been largely priced in by investors beforehand, at least for the short term. Kok Kee Chong, chief executive officer of Singapore-based digital asset exchange AsiaNext, told Bloomberg:
“As expected, the halving was fully priced in so price movement was limited. Now the industry will have to wait and see whether a rally will occur in the coming weeks amid sustained institutional interest.”
Many Bitcoin proponents view the halving as a positive catalyst for the digital asset’s price, as it reduces the rate at which new BTC are introduced into circulation. This, combined with increased demand from new spot Exchange-Traded Funds (ETFs) and institutional investors, is expected to keep fueling the bull market in the coming weeks.
Figures such as MicroStrategy Inc. Chairman Michael Saylor have touted Bitcoin as a superior store of value compared to traditional fiat currencies.
However, not all analysts share this optimism. JPMorgan expects to see some downside in bitcoin price movements post-halving, and Deutsche Bank does not anticipate significant price increases. Nonetheless, the impact of the halving may become more pronounced in the months to come, particularly as Bitcoin’s returns diminish from the halving day to its cycle top.
Bitcoin Halving: Impact on Miners
One of the most immediate effects of the halving will be felt by miners. Miners with access to cheap and reliable power sources are expected to fare better in the post-halving market dynamics. However, some miners, particularly those with high operating costs, may struggle and could potentially exit the market. Maxim’s analyst, Matthew Galinko, told CNBC:
“Some miners, many that are not public, could exit the market with a combination of poor access to power, efficient machines, and capital. Miners with capital and relatively expensive power will likely find opportunities in the wake of potential consolidation and disruption driven by the halving.”
Historically, after halving, the Bitcoin hash rate— the total computational power used by miners— has experienced a temporary decline, followed by recovery in the medium term. Despite the recent record-high hash rate leading up to the halving, past trends suggest that the hash rate could dip temporarily before stabilizing.
While the fourth Bitcoin halving event has unfolded without major immediate price fluctuations, its long-term impact on the market, particularly on miner profitability and network dynamics, remains to be seen.
