Source: Wall Street News
Analysts believe that “halving” may be one of the drivers of the rise in the crypto market this year. “Halving” also directly affects miners' income, which is bad for miners' stock prices.
At a time when prices are weak, Bitcoin may be “halved” for the fourth time in 15 years since its inception this Friday. This incident will become the most watched and influential headline news in the coin industry recently.
People unfamiliar with the operation of the Bitcoin network may have some questions: what is a “halving”, when will it happen, why is it necessary, and what kind of impact might it have on the Bitcoin price?
What is a “halving”? what do you need?
The so-called “halving” means “halving” the rewards that miners receive through mining. Every time the Bitcoin blockchain generates 210,000 blocks, the Bitcoin block reward is cut in half.
Currently, miners who win the mining competition will be rewarded with 6.25 bitcoins. After halving, the reward will drop to 3.125 yuan.
Bitcoin's creator Satoshi Nakamoto determined a fixed supply when designing Bitcoin, making it different from fiat currencies such as the US dollar. According to the rules in the Bitcoin protocol code, there can only be 21 million bitcoins in total. Bitcoin experts believe that the last piece of bitcoin is expected to be mined around 2140.
Every time a miner successfully digs a new block, they receive a certain amount of Bitcoin rewards. These rewards are designed to motivate miners to provide computing power to the Bitcoin network.
Miners are like the guardians of the Bitcoin network. They not only compete for computing resources, but also shoulder the heavy responsibility of maintaining the stable operation of the system. Every transaction needs to be verified and confirmed by miners. Only when it is approved by enough miners can the transaction finally be written into the blockchain and become a permanent record.
In the early days of Bitcoin, miners only needed to run software nodes on their laptops to obtain bitcoins. But as competition intensifies, miners must now use powerful computers and consume significant amounts of energy to stay competitive.
One of the original purposes of Bitcoin's design was to become a deflationary asset, that is, its value will increase over time. Therefore, in order for Bitcoin to become a deflationary asset, the Bitcoin rewards miners receive must decrease over time, thereby limiting the total supply of Bitcoin.
Commenting to MarketWatch, Matt Weller, Global Research Director at Forex.com and City Index, said:
The main purpose of “halving” is to control the Bitcoin supply and create a deflationary economic environment. By slowing the generation of new bitcoins, assuming demand remains stable or increases, halving will help maintain scarcity and increase the value of cryptocurrencies.
When will the “halving” happen?
Ali Dhanani, technical partner at law firm Baker Botts, said that no one can say exactly when the “halving” will occur, but it will happen after the 840,000 block of the Bitcoin blockchain is completed.
As of Monday evening, the Bitcoin blockchain had reached 839,400 blocks (and counting), according to blockchain.com data. Dhanani said that if a block is dug up every 10 minutes on average, this means the “halving” will occur 4.3 days after Monday evening, that is, Friday night or early Saturday morning EST.
For every 210,000 blocks excavated, the rewards miners get for completing a block are “halved”.
In the past, this took an average of about four years. The first halving occurred on November 26, 2012, the second on July 11, 2016, and the third on May 11, 2020.
Furthermore, according to Weller statistics, the previous “halving” occurred a few months before the Bitcoin bull cycle began.
How does the “halving” affect the price of Bitcoin?
Based on historical experience, the halving provided limited immediate support for Bitcoin's price.
According to Weller, in theory, the impact of the “halving” on the Bitcoin price may have been reflected because the approximate date is known in advance.
But here's a new situation — once Bitcoin hit a record high, it's never been halved so quickly. Analysts believe this “halving” may be one of the drivers of this year's rise in the crypto market.
In addition to this, the Federal Reserve's suggestion of interest rate cuts in 2024 and the launch of a Bitcoin spot ETF earlier this year all affected Bitcoin's trend.
Bitcoin “halved”, miners “lying down”?
Compared to the price of Bitcoin, the “halving” seems right so far$Marathon Digital (MARA.US)$Bitcoin miners' stock prices will have an even greater impact.
Marathon Digital's stock price has fallen more than 36% this year to $14.6 as of Tuesday's close.
Other miners have also experienced sharp declines in stock prices since the beginning of the year, including$Riot Platforms (RIOT.US)$It has fallen nearly 45% since 2024, and closed at $8.06 on Tuesday.
This is easy to understand. The “halving” directly affects mining rewards (the other major source is transaction fees), which is one of the two major sources of income for miners. However, miners' operating costs, such as electricity, equipment, etc., will not be reduced by halving.
This means that if Bitcoin prices and transaction fees do not rise significantly to offset the “halving” effect of rewards, many miners may face difficulties in making a profit.
editor/tolk