Source: Sina Finance
As the Bitcoin system update, known as the “halving,” has been completed, companies that make money by ensuring the smooth and safe operation of the digital currency's functions may experience a potential impact.
This event, which is held every four years, reduces the so-called mining reward by half. The so-called reward is the amount of bitcoins released in the Bitcoin network to reward mining companies that verify transactions. According to analytical websites Mempool.space and Blockchain.com, the adjustments took effect at 8:10 p.m. New York time last Friday. After the “halving,” the price of Bitcoin held steady around $64,000.
This change in rewards was entirely intentional and pre-determined by the code running the Bitcoin blockchain. Satoshi Nakamoto, the creator of Bitcoin whose real identity is unknown, is trying to use the “halving” mechanism to maintain the final hard limit of bitcoins at 21 million to prevent cryptocurrency inflation. This is the fourth time since 2012 that Bitcoin has been halved, and the daily rewards paid to miners will drop from 900 bitcoins to 450 bitcoins.
Bitcoin supporters expect the halving to be a positive catalyst for the latest bull market, which will further reduce the supply of new tokens as demand for Bitcoin rises from new exchange-traded funds (ETFs) that directly hold this digital asset. Proponents of this original cryptocurrency, such as$MicroStrategy (MSTR.US)$Chairman Michael Saylor said Bitcoin is more valuable than traditional fiat currencies, and they believe traditional fiat currencies are more susceptible to inflation.
However, although Bitcoin has reached record highs after past halving mechanisms, analysts at institutions such as J.P. Morgan Chase and Deutsche Bank expect this event to be largely reflected in the market.
“As expected, the impact of the halving has been fully reflected in prices, so price fluctuations are limited,” said Kok Kee Chong, CEO of AsianNEXT, a Singapore-based digital asset exchange for institutional investors. “Right now, the industry still needs to wait and see if a rebound will occur in the next few weeks as institutional interest continues.”
CryptoQuant's data shows that although the price of Bitcoin barely changed after being halved, the average transaction fee on the network jumped more than 730% to $250 before falling back to $164.
Notably, the dilution effect of Bitcoin mining weakens with each halving. Although in the cycle after the first halving, the number of tokens mined was 50% of Bitcoin's circulation when the halving took effect, the new supply will only account for 3.3% in the next cycle.
Edward Chin, co-founder of Parataxis Capital, said that short-term bullish sentiment towards Bitcoin may be affected by macroeconomic factors, such as hints that the Federal Reserve is delaying interest rate cuts and the conflict in the Middle East region.
“We may take a slight break over the next quarter until the macro situation is clear,” Chin said. “In the meantime, the main factor driving the price is likely to remain ETF funding flows.”
The main impact of the halving is expected to be Bitcoin mining companies rather than the actual price of the cryptocurrency.
The blockchain renewal trend will wipe out miners' multi-billion dollars of annual revenue, but if the price of Bitcoin continues to rise, this impact will lessen.
Bitcoin mining is an energy-intensive process where miners use specialized computers to verify transactions on the blockchain.$Marathon Digital (MARA.US)$ with$Riot Platforms (RIOT.US)$Large miners and others have spent billions of dollars on obtaining energy, purchasing mining equipment, and building data centers.
J.P. Morgan expects the industry to experience consolidation and the market share of listed companies to increase.
J.P. Morgan analysts wrote in a report that publicly listed Bitcoin miners are in a good position to take advantage of the new environment, mainly because they have access to more funding channels, particularly equity financing. “This helps them scale their operations and invest in more efficient equipment.”
editor/tolk