Bitcoin’s fourth halving is complete. And while the cryptocurrency’s prices have fallen from the highs reached earlier in the day, there doesn’t seem to have been much of a reaction.
Bitcoin was trading at $63,000 about 30 minutes after the halving, which officially occurred after the mining of the 840,000th block in the Bitcoin blockchain.
As you can see from the graph, there were no particular shocks the day before, during and after halving.
Why is halving necessary?
Bitcoin miners maintain the Bitcoin network by competing with each other to solve complex cryptographic problems. In doing so, they provide computing power that allows each node running Bitcoin software to validate each transaction by consensus. This ensures the security of the blockchain and the integrity of its transaction records.
Each time a miner succeeds in mining a new block of the Bitcoin blockchain, they are rewarded with a certain number of tokens. These rewards were designed as an incentive to encourage users to power the distributed network.
In the early days of Bitcoin, miners could earn tokens by simply running a software node on their laptops. But as competition has intensified, miners now have to use powerful computers that require a lot of power to stay competitive.
And for Bitcoin to remain a deflationary asset, the remuneration that miners receive must decrease over time to limit the supply of the cryptocurrency.
“The primary purpose of halving is to control Bitcoin’s supply, creating a deflationary economic environment,” said Matt Weller, global head of research at FOREX.com and City Index. “By slowing the rate at which new Bitcoins are created, halving helps to maintain scarcity and potentially increase the cryptocurrency’s value, assuming demand remains steady or increases.”
How has Bitcoin’s fourth halving affected its price?
В прошлом влияние сокращения вдвое на цену биткоина было не очень активным, по крайней мере, на начальном этапе. Но, как показывает Веллер на графике ниже, предыдущие халвинги предшествовали началу нового биткоин-бума на несколько месяцев.
In the past, the impact of a halving on the Bitcoin price was not very active, at least initially. But as Weller shows in the chart below, previous halving preceded the start of a new Bitcoin boom by several months.
This time around, however, he expects that the impact of the halving has probably been factored into the Bitcoin price well in advance, given how much the cryptocurrency has already risen in value in 2024.
The fact that Bitcoin recently traded at an all-time high presents an interesting problem. Bitcoin’s halving has never followed so soon after a record high. Some believe this event played a role in the cryptocurrency’s 2024 rally.
Other reasons commonly cited for Bitcoin’s spike since the beginning of the year include the Federal Reserve’s warning to lower interest rates in 2024 and the introduction earlier this year of 11 exchange-traded funds that can buy and hold Bitcoin directly. Previously, Bitcoin-ETFs were limited to trading futures contracts tied to the cryptocurrency.
According to FactSet, spot Bitcoin-ETFs now have nearly $60 billion in assets, including $22 billion in the Grayscale Bitcoin Trust GBTC, which recently converted to an ETF from a closed-end fund.
Despite the influx of money into these ETFs, the cryptocurrency’s exchange rate has actually fallen over the past month. It was trading at around $63,000 on Friday night, down from a high of $73,700 in mid-March – a drop of about 14%, according to FactSet data.
Bitcoin’s fourth halving appears to have had a more immediate impact on miner stocks, which rose sharply during Friday’s trading on Wall Street.
Marathon Digital Holdings Inc. MARA rose nearly 10 percent to $16.50 on Friday and added another 1.5 percent in after-hours trading, according to FactSet data. Fellow miner Riot Platforms Inc. RIOT added more than 10% to $9.13 a share, and the price was up another 2% hours later.
