The much-anticipated bitcoin halving event, which reduces the issuance of new bitcoins approximately every ten minutes by half, is projected to occur on either Friday or Saturday. Historically, such events have been tied to substantial bitcoin price surges. However, this time, expert opinions remain split regarding the potential for price escalation.
When the network was launched in January 2009, the block reward was a substantial 50 bitcoins. The reward halved after every 210,000 blocks, roughly every four years, adhering to a predetermined schedule. Following this upcoming halving, the reward will shrink to 3.125 bitcoins from the existing 6.25 bitcoins.
Even though the market is aware of the halving schedule in advance, the 50% reduction in new bitcoin creation is believed to alter the crypto asset’s supply-demand dynamics. Each of the prior three halving events saw the bitcoin price hitting new all-time highs months later.
The rally was largely attributed to Exchange Traded Funds (ETFs), as per analysts. Many believe that a demand-supply imbalance, induced by heightened ETF demand and constrained supply post-halving, could drive bitcoin prices upward.
Deutsche Bank analysts mention that the halving event is “partially factored in” and they do not anticipate a significant post-halving price surge.
Elevated Treasury yields are causing concern among other analysts.
“Whether the BTC halving this coming week would be a ‘buy the rumor, sell the news event’ is arguably less significant for BTC’s medium-term view,” wrote Goldman Sachs analysts in a Coindesk note last week. “The BTC price is likely to remain influenced by the aforementioned supply and demand dynamics, along with continuous demand for BTC ETFs. This interplay, combined with the self-reflexivity of crypto markets, primarily dictates spot price action.”
Bitcoin indeed appears to be experiencing some pre-halving nervousness. Despite setting multiple price records in March, the price trend of bitcoin has conspicuously skewed downward since April 8. Nonetheless, this isn’t unprecedented; a similar drop was observed prior to the 2016 halving, which was followed by a new peak within a year.
Although the intended discovery time for new blocks spans approximately ten minutes, short-term fluctuations can occur based on the quantity of computational power directed at the network. However, block times are recalibrated to the ten-minute target frame roughly every fortnight through mining.
Sectors Affected by Bitcoin Halving
Theoretically, three categories of stocks could be influenced by the bitcoin halving: miners, companies that possess bitcoin, and bitcoin trading platforms.
Bitcoin Mining Stocks
As the mining incentive reduces by half, this potentially threatens the revenues and, consequently, the stock values of bitcoin miners.
Analysts propose that the bitcoin price surge might counterbalance the effects of diminished bitcoin rewards. Miners might, however, need to seek
Volatility surrounding the halving is likely to lead to higher trading volumes, impacting platforms such as Coinbase.
Shares of bitcoin miners like Marathon Digital lost roughly a fifth of their worth over eight days following the bitcoin downturn’s onset on April 8, though there’s been some recovery in recent days.
MicroStrategy (Ticker) held more than 214,246 bitcoins in its portfolio, and substantial positions can affect its stock price if bitcoin trends downward. MicroStrategy shares have lost a quarter of their value this month so far.