On Friday night, the Bitcoin network completed its fourth “halving”, reducing the rewards earned by miners from 6.25 Bitcoins to 3.125 Bitcoins.
Bitcoin prices have been volatile ahead of the event, dropping about 4% this week to trade around $64,100, according to Coinmetrics.
Structurally, the halving itself should not affect Bitcoin price in the short term, but many investors are anticipating a big rally in the coming months based on the cryptocurrency’s performance after the previous halving. I’m looking forward to it. After the 2012, 2016, and 2020 halvings, Bitcoin price rose approximately 93x, 30x, and 8x, respectively, from the halving price to the cycle high.
However, this event will be a major test for mining companies.
“All else being equal, the halving would cut industry revenues in half, triggering a wave of consolidation and business closures, while (hopefully) increasing the network’s hashrate,” said Reginald Smith, an analyst at JPMorgan. “It will streamline capital spending for the industry, which is ultimately good for the rest of the operators.” he said in a recent note to investors.
Hash rate is a measure of the computational power used to process transactions on the Bitcoin network. The greater the miner’s hashrate, the greater the earning opportunity.
Mining stocks were volatile in the days leading up to the event. Many have seen double-digit declines this year, although in 2023 they have recovered between about 300% and 600%. riot platformFor example, in 2024 it was down about 41% through Friday’s close, but in 2023 it was up 356%.
“So far, the market has viewed Bitcoin mining stocks as just a BTC replacement because there are no Bitcoin ETFs,” Bernstein analyst Gautam Chughani said. ”[The] The halving will further differentiate the low-cost, large-scale consolidation winners from the remaining smaller miners who may be at a disadvantage after the halving. ”
Mining stocks in 2023 and 2024
First year 2024 | Return in 2023 | |
---|---|---|
Marathon Digital (MARA) | -30.2% | 586.84% |
Riot Platform (Riot) | -41.08% | 356.34% |
Clean Spark (CLSK) | 54.4% | 440.69% |
Iris Energy (IREN) | -31.68% | 472% |
Crypto mining (CIFR) | -7.63% | 637.50% |
Still, speculators may still take advantage of this event to trade. Another J.P. Morgan analyst, Nikolaos Panigirtzoglou, said Thursday that the short-term outlook for Bitcoin is weak, citing overbought conditions and the price of Bitcoin remaining above its volatility-adjusted price relative to gold. He said he expects the price of Bitcoin to fall after the halving. He also pointed out that venture capital funding for crypto projects has been constrained.
Analysts at Deutsche Bank have a similar view.
”[The] “Bitcoin’s halving has already been partially priced in by the market, and we do not expect the price to rise significantly after the halving,” the company’s Marion Labour said in a note on Thursday. “Half-lives, by their nature, were widely anticipated in advance.” Bitcoin algorithm. ”
“We expect prices to remain elevated going forward,” he added, citing expectations for future Spot Ethereum ETF approvals, future central bank rate cuts, and regulatory developments.
Bitcoin is currently trading at just under $64,000, about 13% off its March 14th all-time high of $73,797.68.