A highly anticipated Bitcoin software update called the “halving” has been completed, dealing a potential blow to the companies that make money by ensuring that the digital currency functions smoothly and securely.
The once-every-four-years event cut in half the so-called mining reward, which is the amount of Bitcoin released from the network to compensate companies known as miners for validating transactions. The modification went into effect as of 8:10 p.m. Friday evening New York time, according to data from analytics websitemempool.spaceand Blockchain.com. The price of Bitcoin was little changed near the $64,000 level following the halving.
This change to the rewards was all by design and preordained by the code that runs Bitcoin’s blockchain. The supposed anonymous creator of Bitcoin, Satoshi Nakamoto, sought to use the halving mechanism to maintain an eventual hard cap of 21 million Bitcoin in order to keep the original cryptocurrency from being inflationary. As a result of this halving, the fourth since 2012, the daily reward paid to miners will drop to 450 Bitcoin from 900.
Bitcoin advocates expect the halving to be a positivecatalystfor the latest bull market since it further reduces the supply of new tokens at a time when demand for them has risen from new exchange-traded funds that directly hold the digital asset. Proponents of the original cryptocurrency such as MicroStrategy Inc. Chairman Michael Saylor have touted it is a better store of value than traditional fiat currencies, which they say are more vulnerable to inflation.
Still, while Bitcoin has rallied to records following past halvings, market watchersincluding analystsfrom JPMorgan Chase & Co. and Deutsche Bank AG had predicted that the event was pretty much priced into the market.
“As expected, the halving was fully priced in so price movement was limited,” saidKok Kee Chong, chief executive officer of Singapore-based AsiaNext, a digital-asset exchange for institutional investors. “Now the industry will have to wait and see whether a rally will occur in the coming weeks amid sustained institutional interest.”
While Bitcoin’s price was little changed following the event, the average transaction fee on the network jumped over 730% to $250 before coming down to $164, data from CryptoQuant shows.
Notably, the dilutive effect of Bitcoin mining decreases with each halving. While the number of tokens mined in the cycle that followed the first halving amounted to 50% of Bitcoin outstanding at the time the halving took effect, new supply in the upcoming cycle will only amount to 3.3%, according to data compiled by Bloomberg.
Bullishness toward Bitcoin in the near term may be dampened by macroeconomic influences, such as signals from the Federal Reserve that interest-rate cuts are on hold and conflict in the Middle East, according toEdward Chin, co-founder of Parataxis Capital.
“We are likely to chop a bit over the coming quarter until there is clarity on the macro front,” Chin said. “During that time, the primary driver of price will likely continue to be ETF fund flows.”
The main impact from the halving is expected to be on Bitcoin mining companies rather than the actual price of the cryptocurrency.
The blockchain update is poised towipe outbillions of dollars in annual revenue for miners, though the effect will be mitigated if the cryptocurrency’s price continues to rise.
Bitcoin mining is an energy-intensive process, in which miners use specialized computers to validate transactions on the blockchain. Large-scale miners such as Marathon Digital Holdings Inc. and Riot Platforms Inc. have spent billions of dollars on acquiring energy, purchasing mining equipment and building out data centers.
JPMorgan expects the sector to consolidate, with publicly-traded firms gaining market share.
“Publicly-listed Bitcoin miners are well positioned to take advantage of the new environment, mainly due to greater access to funding and in particular equity financing,” JPMorgan analysts wrote in a note this week. “This helps them to scale their operations and invest into more efficient equipment.”
Past halvings have been completed with no discernible disruption to the functioning of the Bitcoin blockchain.
The next halving is set to take place in 2028 and the reward will be reduced to 1.5625 from 3.125 for a miner that successfully processes a block of transaction data. The average time to finish a block is around 10 minutes. There are expected to be 64 Bitcoin halvings before the 21 million cap isreachedsometime around 2140, at which point halvings will cease and the blockchain will stop issuing new tokens.
When that happens, Bitcoin miners will have to rely on transaction fees, their other revenue source besides mining rewards. Rising transaction fees may help some miners stay afloat as the rewards continue to dwindle, yet those fees are currently only a small portion of total revenue for miners.
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FAQs
The main impact from the halving is expected to be on Bitcoin mining companies rather than the actual price of the cryptocurrency. The blockchain update is poised to wipe out billions of dollars in annual revenue for miners, though the effect will be mitigated if the cryptocurrency's price continues to rise.
What will happen at the next Bitcoin halving? ›
The next Bitcoin halving is expected to occur around April 2024. The exact date is difficult to predict as it depends on block height being reached, but it is estimated to happen around April 19-20. During the 2024 halving, the block reward for miners will be cut in half, from 6.25 BTC to 3.125 BTC.
What is the result of Bitcoin halving? ›
The Bitcoin network on Friday evening 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, and fell about 4% this week to trade around $64,100, according to Coin Metrics.
What is the Bitcoin halving for dummies? ›
This reward is reduced by half every four years, hence the term halving. It's akin to a predictable, scheduled pay cut for these miners. Halving not only adjusts miners' rewards. It also reduces the rate at which new coins are created, decreasing the new supply and influencing the market value.
Who owns the most Bitcoin? ›
Satoshi Nakamoto. The anonymous creator of Bitcoin, Satoshi Nakamoto, reportedly possesses approximately 1 million Bitcoin, which are stored in multiple wallets. At the current price, the amount would be worth around $60 billion.
Which coin will reach $1 in 2024? ›
Exploring the potential cryptocurrencies like Pikamoon, Dogecoin, Book of Meme, Rosewifhat, and Zilliqa as contenders to hit the $1 milestone. Key factors like utility, viral potential, and clear roadmaps suggest their potential amidst market sentiment and unique tokenomics.
Is Bitcoin halving bullish? ›
Bitcoin Halving Is Not Bullish
Thielen, though, contended that those bull moves were largely a result of the positive macro environment, and not driven by the halving itself. The most recent halving in May 2020, for example, came alongside massive monetary and fiscal stimuli surrounding the Covid shutdowns.
Will Bitcoin rise after halving? ›
Image: Bernstein. “Historically, bitcoin has experienced notable price increases in the six months following each halving event. In fact, bitcoin reached new all-time highs in each four-year period between the previous halving events,” Binance CEO Richard Teng told The Block.
Is Bitcoin halving good or bad? ›
Historically, the supply shock generated by the halving has marked the start of significant bull markets for bitcoin. And as we approach the fourth halving, I believe that this trend will continue, potentially taking bitcoin's price to a new all-time high.
What will happen after Bitcoin halving in 2024? ›
After the halving, miners' rewards for processing new transactions will be reduced from 6.25 bitcoin to 3.125 (about $200,000)—a significant immediate reduction of revenue. As a result, mining will become unprofitable for many smaller operations.
When its supply is reduced through halving, and if the demand stays constant or increases, we often see a ripple effect on the prices of other cryptocurrencies.
How do you make money with Bitcoin halving? ›
Strategies to capitalize on the Bitcoin halving
- Timing the market. ...
- Short-term and long-term investment planning. ...
- Short-term trading. ...
- Long-term strategy. ...
- Dollar-cost averaging. ...
- Diversifying portfolio. ...
- Bitcoin derivatives trading. ...
- Options.
How Long Does It Take to Mine 1 Bitcoin? The reward for mining is 3.125 bitcoins. It takes the network about 10 minutes to mine one block, so it takes about 10 minutes to mine 3.125 bitcoins.
Who owns 1% of Bitcoin? ›
MicroStrategy now owns 214,246 bitcoins, or slightly more than 1% of all Bitcoin that will ever exist. That's a staggeringly large number.
How many dollars does it take to buy one Bitcoin? ›
BTC to USD
| Amount | Today at 1:52 am |
|---|
| 1 BTC | $57,302.56 |
| 5 BTC | $286,512.80 |
| 10 BTC | $573,025.60 |
| 50 BTC | $2,865,128.00 |
4 more rowsF rom the increasingly ferocious federal crackdown on the cryptocurrency business, it might appear the U.S. government cannot stand digital currencies. Yet there is a love-hate dynamic: the Treasury is sitting on a stash of 207,189 bitcoin, worth $5 billion, by far the largest such state-owned hoard.
Will Bitcoin go up after halving? ›
Typically, Bitcoin prices continue to surge for a good few months following a halving month, rising, on average, for seven months.
What will happen when Bitcoin halves in 2024? ›
A Bitcoin halving event occurs when the reward for mining Bitcoin transactions is cut in half. Halvings reduce the rate at which new coins are created and thus lower the available amount of new supply. Bitcoin last halved on April 19, 2024, resulting in a block reward of 3.125 BTC.
What is Bitcoin predicted price in 2024 halving? ›
A recent report predicts that Bitcoin will reach a new all-time high in 2024. Bitcoin (BTC) is expected to reach a new record of $88,000 (€82,000) throughout the year, before it settles around $77,000 at the end of 2024, according to a new report. The cryptocurrency's current price sits at around $43,000.
