Bitcoin is expected to go through a “halving” in the next day or two, a preprogrammed event that could have an impact on the production of the world’s largest cryptocurrency. This halving, which occurs roughly every four years, was designed by bitcoin’s creator, Satoshi Nakamoto, to reduce by half the reward that miners of the digital token receive. This reduction in rewards is meant to decrease the amount of bitcoin entering the market, creating more scarcity of the cryptocurrency. As a result, there is speculation that the halving could lead to an increase in demand and a rise in the price of bitcoin, which has already seen a 50% increase since the beginning of the year.
Bitcoin miners currently receive a fixed reward of 6.25 bitcoin, worth about $402,000, for successfully validating a new block on the bitcoin blockchain. After the halving, this reward will be reduced to 3.125 bitcoin. This change will also slow the rate at which new bitcoins enter the market, ultimately decreasing the supply of coins. With a maximum limit of 21 million bitcoins set by Satoshi Nakamoto, and over 19.5 million already mined, less than 1.5 million bitcoins remain to be created. The last bitcoin halving occurred in May 2020 when the price of bitcoin was around $8,602, and by May 2021, the value of bitcoin had surged to almost $57,000.
Bitcoin halvings occur regularly after the addition of every 210,000 blocks to the blockchain, roughly every four years. The next halving is expected to take place late Friday or early Saturday, although there are no set calendar dates for this event. Some experts believe that the upcoming halving will not have a significant impact on bitcoin’s price, as investors and traders have already anticipated and factored in this event. Others expect that there could be a short-term boost in bitcoin’s price, with a potential longer-term increase due to growing demand from new ETFs and the supply shock of the halving.
The impact of the halving on bitcoin miners could lead to the need for increased energy efficiency or the raising of new capital to sustain operations. Bitwise’s research report found that total miner revenue decreased one month after each of the three previous halvings, but rebounded significantly after a full year due to spikes in bitcoin prices and larger miners expanding their operations. The future performance of mining companies following the upcoming halving remains to be seen, but it is expected that major players will continue to expand and improve efficiency through technological advancements within the industry.
