Bitcoin is on the verge of experiencing a "halving" in the next day or two, a programmed event that could have an impact on the production of the world's largest cryptocurrency.
The halving, which takes place approximately every four years, was created by the mysterious bitcoin founder, Satoshi Nakamoto, to cut in half the reward that miners of the digital token receive whenever a certain number of blocks are added to the blockchain. The intention behind this move is to decrease the amount of bitcoin miners receive for their work, leading to a reduction in the number of bitcoins entering the market and therefore increasing the scarcity of the cryptocurrency.
This development has led to speculation that the halving might drive up demand and subsequently boost the price of bitcoin, which has already seen a nearly 50% increase since the beginning of the year. Much of the recent surge in bitcoin's value is attributed to the early success of a new investment method for the asset — spot bitcoin ETFs, which were approved by U.S. regulators in January.
For those interested, here is some information about bitcoin's upcoming "halving."
Understanding the concept of bitcoin "halving"
Bitcoin miners are rewarded with a fixed amount of bitcoin when they successfully validate a new block on the bitcoin blockchain. Currently, this reward is 6.25 bitcoin, equivalent to about $402,000 based on the current trading price of the token.
Following the halving event, miners will start receiving 3.125 bitcoin for achieving the same milestone. This adjustment will lead to a decrease in the rate at which new bitcoins are introduced into the market, thereby reducing the coin supply. As per the limits established by Satoshi Nakamoto, the total number of bitcoins that can ever exist is capped at 21 million. With over 19.5 million bitcoins already mined, less than 1.5 million bitcoins remain to be created.
Recalling the most recent bitcoin halving
The previous halving occurred in May 2020, when the price of bitcoin was approximately $8,602, as reported by CoinMarketCap.
By May 2021, the value of bitcoin had skyrocketed nearly seven times to nearly $57,000.
Anticipating the next halving event
Halving events are scheduled to happen after every 210,000 "blocks" are added to the blockchain during the mining process, where transactions are recorded.
Although there are no specific calendar dates set for these occurrences, they typically take place approximately every four years. Based on current estimates, the next halving is projected to take place either late Friday or early Saturday.
Expert Predictions for Bitcoin's Price Post-Halving
While some experts believe that the next halving event will have little impact on bitcoin's price due to the cryptocurrency's previous surge this year, others are more optimistic about its potential for growth.
Nigel Green, CEO of financial services firm deVere Group, stated that many investors, traders, and speculators had already factored in the halving months in advance, leading to a significant price increase prior to the event. However, Bitwise senior crypto research analyst Ryan Rasmussen sees a positive outlook for bitcoin's price in the long term.
Rasmussen suggests that the combination of growing demand from new ETFs and the supply shock from the halving could drive bitcoin's price even higher. He anticipates a strong performance for bitcoin over the next year, with some experts predicting price gains ranging from $100,000 to $175,000, and even reaching as high as $400,000.
Implications for Bitcoin Miners
Experts warn that the upcoming halving could put pressure on bitcoin miners to enhance energy efficiency or seek additional capital to sustain their operations.
With the upcoming halving on the horizon, the future of mining companies remains uncertain. However, many believe that major players in the industry will continue to expand and leverage technological advancements to improve operational efficiency.
