The Bitcoin network on Friday night completed its fourth “halving”, reducing the rewards earned by miners to 3,125 bitcoins from 6.25.
The price of bitcoin has been volatile ahead of the event, falling about 4% this week to trade around $64,100, according to Coin Metrics.
Mechanically, the halving itself shouldn’t affect bitcoin’s price in the short term, but many investors expect big gains in the coming months, based on the cryptocurrency’s performance after previous halvings. After the 2012, 2016, and 2020 halvings, bitcoin’s price has increased approximately 93x, 30x, and 8x, respectively, from its midday price to the top of its cycle.
However, the event is a big test for mining companies.
“All else being equal, the halving will cut industry revenue in half, causing a wave of consolidation and business closures, while (hopefully) streamlining the network hashrate and industry potential, which is ultimately good for the rest of the players” , JPMorgan analyst Reginald Smith said. in a recent note to investors.
Hash rates are a measure of the computing power used to process transactions on the bitcoin network. The higher a miner’s hash rate, the greater the revenue opportunity they have.
Mining stocks were volatile in the days leading up to the event. Many are in double digits for the year, having rallied between about 300% and 600% in 2023. Riot Platformsfor example, it was down about 41% in 2024 through Friday’s close, but up 356% in 2023.
“The market so far has seen bitcoin mining stocks as simple BTC proxies, in the absence of bitcoin ETFs,” said Bernstein analyst Gautam Chhugani. “[The] The halving would further differentiate the low-cost, high-scale consolidation winners from the remaining smaller miners who may be at a disadvantage after the halving.”
Mining reserves in 2023 and 2024
2024 YTD | Return 2023 | |
---|---|---|
DIGITAL MARATHON (MARA) | -30.2% | 586.84% |
RIOT PLATFORMS (RIOT) | -41.08% | 356.34% |
CLEANSPARK (CLSK) | 54.4% | 440.69% |
IRIS ENERGY (IREN) | -31.68% | 472% |
CIPHER MINING (CIFR) | -7.63% | 637.50% |
However, speculators may still trade the event. Another JPMorgan analyst, Nikolaos Panigirtzoglou, said Thursday that he expects bitcoin’s near-term price to fall after the halving, citing overbought conditions and prices that are still higher than the cryptocurrency’s comparison to gold when adjusted for volatility. He also pointed to sluggish venture capital funding of crypto projects.
Deutsche Bank analysts have a similar opinion.
“[The] Bitcoin halving has already been partially priced in by the market and we do not expect prices to rise significantly after the halving event,” the firm’s Marion Laboure said in a note on Thursday, adding that “it was widely expected from in advance due to the nature of the Bitcoin algorithm”.
“Looking ahead, we continue to expect prices to remain high,” he added, citing expectations for future spot Ethereum ETF approvals, future central bank rate cuts and regulatory developments.
Bitcoin is currently trading at just under $64,000, about 13% from its March 14 all-time high of $73,797.68.