On Friday evening, the Bitcoin network completed its fourth “halving,” reducing the rewards earned by miners to 3,125 BTC from 6.25.
Bitcoin's price had been volatile before the event, falling nearly 4% this week to trade at around $64,100, according to Coin Metrics.
Mechanically, the halving itself should not affect Bitcoin's price in the short term, but many investors expect significant gains in the coming months, based on the cryptocurrency's performance after the previous halving. After the halvings in 2012, 2016, and 2020, Bitcoin's price rose about 93x, 30x, and 8x, respectively, from its halving price on the day to its highest cycle.
However, this event represents a major test for mining companies.
“All else being equal, the halving will cut industry revenues in half, leading to a wave of consolidations and business closures, while (hopefully) rationalizing the network hashrate and capex for the industry,” said Reginald Smith, an analyst at JP Morgan. Which is ultimately good for the remaining operators.” In a recent note to investors.
Hash rates are a measure of the computational power used to process transactions on the Bitcoin network. The higher a miner's hash rate, the more revenue opportunities they have.
Mining stocks were volatile in the days leading up to the event. Many of them are down by double digits this year, after rising between about 300% and 600% in 2023. Riot padsFor example, it was down roughly 41% in 2024 through Friday's close, but up 356% in 2023.
“The market so far sees bitcoin mining stocks as mere proxies for bitcoin, in the absence of bitcoin ETFs,” said Gautam Chogani, an analyst at Bernstein. “(The) halving would further differentiate between the low-cost, large-scale consolidated winners versus the rest of the smaller miners who may be disadvantaged after the halving.”
Mining stocks in 2023 and 2024
However, speculators may continue to trade this event. Another JPMorgan analyst, Nikolaos Panigirzoglou, said Thursday that he expects Bitcoin's price to decline in the near term after the halving, citing overbought conditions and prices that remain higher than the cryptocurrency compares to gold when adjusted for volatility. He also pointed to the weakness of venture capital funding for cryptocurrency projects.
Analysts at Deutsche Bank take a similar view.
“Bitcoin’s halving has already been partially priced in by the market, and we do not expect prices to rise significantly after the halving event,” the company’s Marion Laborie said in a note on Thursday, adding that it was “widely anticipated in advance due to its algorithmic nature.” Bitcoin.”
“Looking ahead, we still expect prices to remain elevated,” she added, citing expectations for future approvals of Ethereum ETFs, future central bank interest rate cuts and regulatory developments.
Bitcoin is currently trading at just under $64,000, roughly 13% below its March 14 all-time high of $73,797.68.
