On Friday evening, the Bitcoin network completed its fourth “halving,” reducing the rewards earned by miners to 3.125 bitcoins from 6.25. The price of bitcoin was volatile leading up to the event, falling about 4% to trade around $64,100. While the halving itself shouldn’t affect the price in the short term, many investors are anticipating significant gains in the months following the event, based on previous halvings. After the 2012, 2016, and 2020 halvings, the bitcoin price increased approximately 93x, 30x, and 8x, respectively, from its halving day price to its cycle top.
The halving presents a significant challenge for mining companies as it will cut industry revenues in half, leading to potential consolidation and business closures. JPMorgan analyst Reginald Smith noted that this could rationalize the network hash rate and industry capital expenditures, which could ultimately benefit the remaining operators. Hash rates, which measure the computational power used to process transactions, are a key factor in determining a miner’s revenue potential. Leading up to the event, mining stocks have been volatile, with many experiencing double-digit declines for the year after significant rallies in 2023.
Some analysts believe that the market may view bitcoin mining stocks as mere proxies for bitcoin, especially in the absence of bitcoin exchange-traded funds (ETFs). The halving could help differentiate between low-cost, high-scale consolidating winners and smaller miners who may be disadvantaged post-halving. Despite this potential differentiation, speculators may still trade on the event. JPMorgan analyst Nikolaos Panigirtzoglou expects the near-term bitcoin price to fall after the halving due to overbought conditions and high prices relative to its comparison to gold when adjusted for volatility. He also noted subdued venture capital funding in crypto projects.
Deutsche Bank analysts share a similar view, stating that the Bitcoin halving is already partially priced into the market, and they do not expect prices to increase significantly following the event. The firm’s Marion Laboure added that the nature of the Bitcoin algorithm makes the halving event widely anticipated in advance. Looking ahead, analysts still expect prices to remain high, citing expectations of future spot Ethereum ETF approvals, central bank rate cuts, and regulatory developments. As of writing, bitcoin is trading at just under $64,000, approximately 13% off its all-time high of $73,797.68 reached on March 14.
In conclusion, the fourth “halving” of the Bitcoin network has reduced the rewards earned by miners, leading to expectations of significant price gains in the months following the event. The halving presents challenges for mining companies, potentially triggering consolidation and business closures. While some analysts anticipate differentiation between mining operators, speculators may still trade on the event. Overall, analysts do not expect a significant increase in prices post-halving but anticipate prices to remain high due to various factors in the cryptocurrency market. Bitcoin is currently trading at just under $64,000, slightly below its all-time high reached in March.
