What will happen if Bitcoin halving? Understand the mechanism of Bitcoin halving and its impact

Bitcoin ushered in the fourth "halving" event in history.

数据表明，截至北京时间2024年4月20日8:09，比特币在区块高度840000处胜利完成了这一重大时刻，挖矿奖励从6.25BTC减半至3.125BTC，而上一次减半则发生在2020年5月11日。

What is the mechanism of Bitcoin halving?

The Bitcoin halving is an important cyclical event in the cryptocurrency space, and the exact timing depends on the speed of block generation in the Bitcoin network.

This event occurs approximately once every 4 years.Or after 21 blocks are mined on the Bitcoin blockchain, the Bitcoin reward miners receive from each new block will be halved.

The purpose of the halving is to reduce the rate at which new Bitcoins are created, thus maintaining their scarcity and value.

• Because cryptocurrency fluctuates greatly and the accompanying investment risks are huge, if you want to seize the dividend of the halving of Bitcoin mining rewards, it is strongly recommended that the investment does not exceed 10% of the deposit, otherwise you will not invest.

Historical halving events:

• 2009: Bitcoin mining rewards start at 50 BTC per block.
• 2012: First halving, reward dropped to 25 BTC.
• 2016: Second halving, reward dropped to 12.5 BTC.
• 2020: Third halving, reward drops to 6.25 BTC.
• 2024: The fourth halving, the reward will drop to 3.125 BTC.

What impact will the Bitcoin halving have?

What will happen after Bitcoin halving:

1. For miners, halving means their block rewards are reduced, which may affect their profits and mining incentives.
2. For the market, halving events are often associated with increases in Bitcoin prices, as reduced supply may lead to a relative increase in demand, pushing the price higher.
3. For investors, the halving is a noteworthy event as it may impact their investment strategies and returns.

Bitcoin price rises slightly after 'halving'

The so-called "halving" means that the rewards received by miners are halved. Every time the Bitcoin blockchain generates 21 blocks, Bitcoin’s block reward is halved. Including this time, Bitcoin has experienced four "halvings" since its birth in 2009.

After the news broke, the price of Bitcoin fell slightly and is currently fluctuating around $63550 per coin.

The result of this halving is that the number of Bitcoins miners receive by verifying transactions per day is reduced from 900 to 450, and the rewards received by miners are also reduced from 6.25 Bitcoins to 3.125 Bitcoins.

“Halving” = the prelude to a new bull market?

Bitcoin supporters had previously expected that the "halving" would become a catalyst for a new bull market because while demand for Bitcoin spot ETFs increased, the "halving" further reduced the supply of Bitcoin.

历史上，比特币减半事件前后的价格波动引起了广泛关注。在2012年、2016年和2020年的减半事件前30天，比特币价格分别上涨了5%、13%和27%。此外，减半事件还推动了比特币地址数量的增长，尤其是在减半后的150天内，新创建的比特币地址数量分别增长了83%、101%和11%。

Although Bitcoin prices have soared to all-time highs after past halving events, market observers, including analysts from JPMorgan Chase and Deutsche Bank, had previously predicted that the impact of this "halving" would be largely It has been digested by the market in advance.

JPMorgan analyst Nicholas Panigirzoglu said on Thursday that he expects Bitcoin to come under some pressure in the short term as the market is over-bought and prices remain elevated relative to gold. He also mentioned that crypto project financing is sluggish.

Analysts at Deutsche Bank had a similar view. Marion Labour, an analyst at the bank, said in a report on Thursday: "The market has already digested the impact of Bitcoin's 'halving' to a certain extent. Considering the characteristics of the Bitcoin algorithm, this halving is to a large extent It has been expected by the market. We do not expect the price of Bitcoin to rise significantly after the halving.”

Guo Qicong, CEO of Singapore-based digital asset exchange AsiaNext, said: "As expected, the 'halving' has been fully reflected in the price, so price changes are limited. Now, the industry will wait and see to see what the future holds amid continued institutional interest. Will there be a rebound in a few weeks?”

Mechanically, the “halving” itself should not affect Bitcoin prices in the short term, but many investors expect a sharp rise in the coming months based on Bitcoin’s performance after several previous halvings. After the halvings in 2012, 2016 and 2020, the Bitcoin price increased by approximately 93 times, 30 times and 8 times respectively from the price on the day of the halving to the cycle peak.

It’s worth noting that each time Bitcoin undergoes a “halving,” the impact (i.e., the dilution effect) of the number of newly mined Bitcoins on the overall Bitcoin supply diminishes. For example, after the first "halving", the number of newly mined Bitcoins was equivalent to 50% of all Bitcoins in circulation at the time of the halving, which had a great impact on the total supply. However, after the fourth "halving", the number of newly mined Bitcoins will only account for 3.3% of the current total supply, and the impact on the total supply will be greatly weakened.

Income drops sharply? The biggest victim of "halving" appears?

Compared with Bitcoin itself, this "halving" has a more significant impact on miners.

On the eve of the halving, Bitcoin miner stock prices fluctuated greatly. For example, Riot Platforms closed down about 41% last Friday, but soared 2023% in 356. Most Bitcoin miner stock prices have fallen by double digits so far this year, in stark contrast to gains of 2023% to 300% in 600.

JPMorgan analyst Reginald Smith recently noted in a note to investors:

"With other conditions remaining unchanged, the 'halving' will significantly reduce industry revenue and trigger a new round of

Industry consolidation and mining company closures. But at the same time, the 'halving' is expected to rationalize network computing power and industry capital expenditures, which will ultimately benefit the remaining mining companies. "

Bernstein analyst Gautam Chogani said:

“In the absence of Bitcoin ETFs, the market has so far viewed mining stocks as alternatives to Bitcoin. The halving will further differentiate miners: low-cost, scalable, integrated winners will emerge from the plethora of small and medium-sized miners The latter may be at a disadvantage after the halving.”

Bitcoin miners' income mainly comes from two aspects: mining rewards and transaction fees. Although the "halving" directly affects mining rewards, miners' operating costs, such as electricity bills, equipment fees, etc., will not be reduced by the "halving".

This means that if Bitcoin prices and transaction fees do not rise significantly to offset the impact of the reward "halving", many miners may face profitability difficulties.