The Bitcoin network completes the fourth-ever ‘halving’ of rewards to miners

On Friday evening, the Bitcoin network completed its fourth “halving,” which reduced miners’ earnings to 3.125 bitcoins from 6.25.

Bitcoin’s price has been erratic ahead of the event, falling roughly 4% this week to around $64,100, according to Coin Metrics.

Mechanically, the halving should have no effect on bitcoin’s price in the short term, but many speculators anticipate significant gains in the coming months based on the cryptocurrency’s record following past halvings. Following the 2012, 2016 and 2020 halvings, the bitcoin price increased by approximately 93x, 30x, and 8x, respectively, from the halving day price to the cycle top.

However, the event serves as a major test for mining firms.

“All else equal, the halving will cut industry revenues in half, triggering a wave of consolidation and business closures, while (hopefully) rationalizing network hashrate and industry capex, which is ultimately good for the remaining operators,” JPMorgan analyst Reginald Smith wrote in a recent note to investors.

Hash rates are a measure of the processing power required to process transactions on the Bitcoin network. The higher a miner’s hash rate, the greater its revenue potential.

Mining stocks have been volatile in the days before the event. Many are down by double digits this year, following a rise of 300% to 600% in 2023. Riot Platforms is down 41% in 2024 as of Friday’s close, but up 356% in 2023.

“The market has seen bitcoin mining stocks as mere BTC proxies, in the absence of bitcoin ETFs,” said Bernstein analyst Gautam Chhugani. “[The] halving would further differentiate the low cost, high-scale consolidating winners vs. rest of smaller miners which may be disadvantaged post-halving.”

However, speculators may still trade on the event. Another JPMorgan analyst, Nikolaos Panigirtzoglou, stated on Thursday that he expects the near-term bitcoin price to decline following the halving, citing overbought conditions and prices that are still higher than the cryptocurrency’s comparison to gold when adjusted for volatility. He also cited low venture capital financing for crypto ventures.

Deutsche Bank analysts hold a similar opinion.

According to the firm’s Marion Laboure, the Bitcoin halving has already been partially priced in by the market and is expected to have little impact on prices. The event has been widely anticipated due to the nature of the Bitcoin algorithm.

“Looking ahead, we continue to expect prices to stay high,” she said, citing upcoming spot Ethereum ETF approvals, central bank rate reduction, and regulatory events.

Bitcoin is presently selling slightly around $64,000, down about 13% from its all-time high of $73,797.68 set on March 14.