What you need to know before the Bitcoin halving

The bitcoin halving – in which the amount of newly issued bitcoin created roughly every ten minutes is cut in half – is expected to take place on Friday or Saturday. In the past, this event was followed by a significant increase in the price of bitcoin, but analysts are divided on whether this will happen this time.

Bitcoin (BTC) hit all-time highs above $73,000 last month, the first time record highs were hit before a halving event, although the price has pulled back in recent weeks. On Thursday morning, bitcoin was trading around $63,500, after falling below $60,000 on Wednesday.

What will happen at the Halving?

After the halving, the incentive for bitcoin miners and the rate of issuance of new bitcoins will decrease by half. This is one of the rules of the network that was “set in stone” by Bitcoin creator Satoshi Nakamoto.

Simply put, bitcoin mining is the process by which all transactions on the Bitcoin blockchain are verified and new bitcoins are minted. Miners who first successfully validate a block containing transaction information are rewarded for their effort.

This reward consists of both a block subsidy and transaction fees. The block subsidy is newly created bitcoin that comes into existence for the first time and has historically accounted for the majority of the value of the block reward.

While the block reward was originally 50 bitcoin when the network launched in January 2009, it has since halved every 210,000 blocks, or roughly every four years, according to a predetermined schedule. After the upcoming halving, block reward will drop to 3.125 bitcoin from the current 6.25 bitcoin.

While new blocks are meant to be found approximately every ten minutes, block times can vary over the short term based on the amount of computing power pointed at the network. That said, block times are recalibrated roughly every two weeks after the ten minute target window through mining difficulty adjustments.

What does the halving mean for Bitcoin’s price?

Although the general schedule of the halvings is known in advance to the market, the 50% drop in the regular creation of new bitcoin is thought to lead to a change in the crypto-asset’s supply and demand dynamics. The bitcoin price reached a new high in the months following each of the previous three halving events.

Analysts say that this bitcoin halving is different for a number of reasons and that a bitcoin rally may not happen.

The largest cryptocurrency by market capitalization reached a new high this four-year cycle before the actual halving occurred for the first time in its history. Bitcoin demand from spot bitcoin exchange-traded funds (ETFs) was largely credited for the rally. Many analysts believe that a supply-demand mismatch due to increased demand from the ETFs and limited supply after the halving could push bitcoin prices higher.

Analysts at Deutsche Bank say the halving has been “partially priced in” and that they do not “expect prices to rise significantly after the halving event.”

Other analysts worry that higher-for-long interest rates are making riskier assets like cryptocurrencies less attractive as Treasury yields remain high.

“Whether BTC halving next week will turn out to be a ‘buy the rumor, sell the news opportunity’ is likely to be less impactful on BTC’s medium-term outlook, as BTC price performance will likely continue to be driven by the aforementioned demand-supply- dynamism and continued demand for BTC ETFs, which combined with the self-reflective nature of crypto markets is the primary determinant of spot price action,” Goldman Sachs analysts wrote in a note last week, according to Coindesk.

Bitcoin is definitely suffering some pre-halving jitters. After setting several price records in March, the price of bitcoin has been in a more pronounced downward trend since April 8. However, this is not the first time this has happened, as the bitcoin price fell before the halving that took place in 2016. reach a new all-time high within the next year.

How Bitcoin Halving May Affect Some Stocks

In theory, there are three types of stocks that could be affected by the bitcoin halving—miners, companies that hold bitcoin, and bitcoin trading platforms.

Bitcoin Mining Shares

As the incentive for mining is cut in half, it threatens the income and consequently the share prices of bitcoin miners.

Shares of bitcoin miners such as Marathon Digital (MARA), Riot Platforms (RIOT), Hut8 (HUT), Cipher Mining (CIFR) and TerraWulf (WULF) each lost about one-fifth of their value over the eight days following the start of the bitcoin downturn on April 8, although they have gained some ground in recent days.

Some analysts suggest that the rise in the price of bitcoin may offset the impact of fewer bitcoin rewards, but miners may have to look for ways to make up the gap over the long term before the next halving cycle.

Bitcoin investors and trading platforms

As of March 18, MicroStrategy (MSTR) held more than 214,246 bitcoins in its portfolio, and that large position could have an impact on its own share price if bitcoin trends lower. MicroStrategy shares have held a quarter of their value so far this month.

Any volatility around halving will mean higher trading volumes, something that could affect trading platforms like Coinbase (COIN) or Robinhood (HOOD). However, even as trading volumes increased this week, analysts at Needham said the impact of the halving could be overshadowed by larger bitcoin volume events for the two trading platforms, Barron’s reported.