The Bitcoin network finished its fourth “halving” on Friday evening. This means the rewards miners get for mining new bitcoins have been cut in half, from 6.25 Bitcoins to 3.125 Bitcoins.
Before the halving, the price of Bitcoin was going up and down a lot, and this week it dropped by about 4%, trading around $64,100, according to Coin Metrics.
The halving itself shouldn’t immediately change the price of Bitcoin, but many investors think Bitcoin will go up a lot in the coming months. They base this on how Bitcoin has performed after previous halvings.
After the halvings in 2012, 2016, and 2020, the price of bitcoin went up by about 93 times, 30 times, and 8 times, respectively, from the day of the halving to when its value peaked.
This halving is also a big test for mining companies.
“All else equal, the halving will cut industry revenues in half, triggering a wave of consolidation and business closures, while (hopefully) rationalizing the network hash rate and industry capex, which is ultimately good for the remaining operators,” noted JPMorgan analyst Reginald Smith in a recent message to investors.
Hash rates measure how much computing power is used to process Bitcoin transactions. Miners with higher hash rates have more opportunities to earn revenue.
Mining stocks have been unstable leading up to the halving. Many are down by double digits for the year, after surging between 300% and 600% in 2023. For example, Riot Platforms is down about 41% in 2024 so far, but it rose 356% in 2023.
“The market so far has seen bitcoin mining stocks as mere BTC proxies, in the absence of bitcoin ETFs,” explained Bernstein analyst Gautam Chhugani.
”Halving would further differentiate the low cost, high-scale consolidating winners vs. rest of smaller miners which may be disadvantaged post-halving.”
However, some speculators might still trade based on the halving event. JPMorgan analyst Nikolaos Panigirtzoglou mentioned on Thursday that he predicts the short-term price of Bitcoin to drop after the halving.
He thinks this because prices are already high and may have gone too far, and also because venture capital funding for crypto projects has been low.
Deutsche Bank analysts share a similar opinion. Marion Laboure from the firm said on Thursday that the market has already partly factored in the bitcoin halving, so they don’t expect prices to rise much after the event. This anticipation is because the Bitcoin algorithm makes the halving predictable.
“Looking ahead, we still think prices will remain high,” she added, pointing to expectations of Ethereum ETF approvals, future central bank rate cuts, and regulatory changes.
The current trading of Bitcoin is just under $64,000, which is about 13% lower than its all-time high of $73,797.68 reached on March 14.
