On the morning of April 20, at block height 840,000, Bitcoin completed its fourth halving. After the halving, the block reward for miners decreased from 6.25 BTC to 3.125 BTC.
In the week leading up to the halving, the price of BTC dropped from $70,000 to $59,600, reaching its lowest point since March. At the time of writing, the price of BTC has stabilized around $63,000, with a cumulative decrease of 10% over the past 7 days.
The essence of Bitcoin halving is to control the supply rate and inflation rate of Bitcoin by reducing the production rate of new coins, thereby reducing the supply of tokens and decreasing the inflation rate.
After this halving, miners will provide approximately 450 BTC to the market each day, compared to the previous 900 BTC. The issuance rate of BTC has also decreased from 1.8% to 0.83%.
Due to the decrease in supply, the BTC supply-demand imbalance in the market may exacerbate Bitcoin’s scarcity and push the price upwards.
After the first three Bitcoin halvings, BTC prices experienced different degrees of significant increases, closely related to the bull market cycle of the entire cryptocurrency market. Therefore, “Bitcoin halving” is also considered a catalyst for the development of the entire cryptocurrency market.
Chris Gannatti, Global Head of Bitcoin ETF Asset Management Company WisdomTree, has stated that “Bitcoin halving is one of the most significant events in the cryptocurrency field this year.”
Google browsing data shows that the search volume for “Bitcoin halving” has reached a new historical high, far exceeding the previous record set in May 2020.
Bitcoin undergoes halving every 4 years. Will Bitcoin’s price rise as expected?
Every time the Bitcoin blockchain produces 210,000 blocks, the block reward for Bitcoin halves. On average, the Bitcoin network produces a new block every 10 minutes, so this halving occurs approximately every 4 years.
As of today, Bitcoin has completed 4 halvings, in 2012, 2016, and 2020. Starting with a block reward of 50 BTC, the first halving reduced it to 25 BTC, the second halving to 12.5 BTC, the third halving to 6.25 BTC, and the fourth halving to 3.125 BTC.
Looking back at the historical data of the previous 3 halvings, BTC prices have rapidly risen within 6-18 months after each halving, reaching new all-time highs. Therefore, the impact of halving on Bitcoin’s price trend and subsequent market conditions has attracted industry attention and is considered a market cycle.
The first halving was completed on November 28, 2012. After the halving, the BTC price increased from $12 to $1,242, an increase of over 100 times.
The second halving occurred on July 9, 2016. Afterward, the BTC price increased from $648 to $19,800, a price increase of 4,158%.
The third halving was completed on May 12, 2020. The BTC price increased from $8,181 to $64,895, a price increase of 693%.
The fourth halving was completed on April 20, 2024, with the Bitcoin price at around $63,000. Will it kick off a new round of price surges like the previous three halvings?
Regarding the impact of this halving on Bitcoin’s future trend, the general view in the industry is that the initial impact on Bitcoin’s price is not significant, but it is beneficial in the long term. From a supply-demand perspective, Bitcoin halving reduces the speed of Bitcoin issuance and the block rewards for miners, which can alleviate the influx of new Bitcoins into the market. With reduced supply and stable or growing demand, it creates conditions for Bitcoin’s price to rise.
Currently, many well-known figures in the cryptocurrency market hold optimistic views on Bitcoin’s trend after this halving and have made bullish predictions.
Plan B predicts that based on Bitcoin’s supply and halving expectations, the price of Bitcoin will range between $100,000 and $1 million after 2024, and the price may skyrocket to $532,000 by 2025.
Anthony Scaramucci, the founder of Skybridge Capital, stated in January this year that the price of Bitcoin may reach $170,000 or more within a year and a half after the halving, and the long-term outlook is that Bitcoin’s market value will reach half of the gold market value.
Michael Novogratz, CEO of Galaxy Digital, bets that Bitcoin will experience a significant increase in price, and after the halving, Bitcoin may reach $150,000.
On the contrary, some industry insiders hold a bearish view on Bitcoin’s future market. They believe that the correlation between Bitcoin halving and price increase does not imply a causal relationship. It is challenging to model these events based solely on historical analysis, and factors such as market sentiment, adoption trends, global market liquidity, and macroeconomic policies also influence Bitcoin’s price trend.
Moreover, in terms of supply and demand, there are already 19.7 million BTC in circulation, and the remaining unmined Bitcoins amount to about 1.3 million (21 million – 19.7 million), which is a very small proportion. Bitcoin halving has already had a minimal impact on Bitcoin’s supply and cannot be the main driving force for Bitcoin’s price increase.
Michael Zhao, a researcher at Grayscale, has warned that although historical precedents show price increases, it does not guarantee that Bitcoin’s price will always rise. He pointed out that external macroeconomic factors played an important role in the previous Bitcoin price surges, and halving is just one of the many factors influencing Bitcoin’s price trend.
Arthur Hayes, co-founder of BitMEX, stated in his latest article “Heatwave” in April that he agrees that halving will push up Bitcoin’s price in the medium to long term. However, he predicts that Bitcoin’s price will enter a turbulent period before and after the halving, and it may experience a sharp drop.
The mining industry’s stocks plummeted before the halving
In addition to price trends, cryptocurrency miners are the group most affected by the halving of Bitcoin rewards. The halving will sharply reduce the input-output ratio of the Bitcoin mining industry. The halving of block rewards means that the number of BTC rewards for miners for newly mined blocks will directly decrease by half, making Bitcoin miners a target every four years. With BTC prices unchanged, investment and operating costs remaining the same, and mining rewards decreasing, the investment payback period for mining machines will be extended. Coupled with current geopolitical conflicts and uncertainties in energy costs, the pressure on the survival of the mining industry has increased.
Analyst Mark Palmer from Benchmar has previously warned that most publicly traded Bitcoin mining companies have already started or announced plans to increase their power and computing capacity to adjust their income and gross profit.
Bloomberg predicts that the halving will result in a loss of approximately $10 billion for the entire cryptocurrency mining industry.
Before the halving, stocks of major listed mining companies have already experienced significant declines. The share prices of Marathon Digital Holdings (MARA), Riot Platforms (RIOT), Iris Energy (IREN), and CleanSpark (CLSK) have fallen for three consecutive days. The largest publicly traded Bitcoin mining company, Marathon Digital Holdings, has seen a decline of over 20% in the past month, while Riot Platforms has fallen by nearly 25%.
However, the mining company CleanSpark emphasized in an interview that Bitcoin halving does not mean a halving of mining company revenue. The difficulty of Bitcoin mining will decrease by up to 15% after the halving, which will bring additional rewards to miners.
Regarding this halving, a miner who has experienced three halving cycles expressed that the decrease in block rewards will lead to a reduction in miner income, but it has limited impact on large miners or mining companies. For the miners who can survive, it is actually beneficial as they will gain a larger share in the mining market. This halving will further promote the professionalization, refinement, efficiency, and concentration of mining operations. Small-scale family-run miners or less advanced mining companies will be eliminated.
He emphasized that the profitability of current mining does not solely rely on mining itself, and transaction fees on the Bitcoin chain may become a new source of income.
In terms of the current mining cost, he calculated that based on the S19Pro+Hyd model, with a hashrate of 198t and power consumption of 5,445w, and a cost of $0.08 per kilowatt-hour, the Bitcoin shutdown price would be around $65,056.
However, if we consider the historical performance of Bitcoin halvings, miners don’t need to worry too much. After all, halving corresponds to an increase in Bitcoin scarcity, and the income from the eventual price increase of Bitcoin can easily cover the increased costs for mining companies.
Additionally, since the launch of Ordinals in December last year, the Bitcoin ecosystem has entered an explosive growth phase, with various Layer2, Sidechain, runic protocols, and other on-chain ecological products flourishing. This prosperity on the chain will also bring transaction revenue to Bitcoin miners.
The impact of halving is weaker than Bitcoin spot ETF
However, this halving is different from the previous three halvings. The entire cryptocurrency industry and Bitcoin itself are undergoing some interesting new changes. The Bitcoin market has become more mature, with more exchanges, financial products, and traditional financial investors participating. On-chain ecological products such as Ordinals, Inscriptions, BRC20, Bitcoin Layer2, etc., are flourishing, and users need to rethink and reevaluate Bitcoin as an asset from a new perspective.
“A bit quiet” is how an experienced OG who has gone through three Bitcoin halving cycles feels about this halving.
He explained that the fourth halving of Bitcoin has far less hype than the previous three. The halvings in 2016 and 2020 received high attention in the cryptocurrency market, with various discussions and news about halving flooding major communities, including AMAs, offline events, and even the hype of tokens such as BCH and LTC months before their halvings. In 2016, there was the Ethereum ICO, and in 2020, there was DeFi Summer and the public chain battle. However, the fourth halving of Bitcoin seems to have low community attention, with very few discussions and scattered news reports about Bitcoin halving.
Another OG mentioned that it’s not just this halving that lacks hype, but the current Bitcoin price surge has also been lower than usual. Bitcoin broke through $70,000 without much attention and user activity seemed to pick up only after surpassing $70,000.
Regarding this, community user Lin stated that a significant reason behind this is the Bitcoin spot ETF driving the current price surge, with institutions taking the lead and retail investors having a smaller proportion.
Furthermore, with several bull market cycles, the cryptocurrency market has developed various Layer1 and Layer2 protocols, LST, Bitcoin inscription ecology, DeFi, GameFi, AI, and other niche products, and Bitcoin is no longer the only choice for users. User attention has also been divided.
Currently, the cryptocurrency market has a market capitalization of nearly $2.5 trillion, with Bitcoin accounting for about 50% ($1.27 trillion), and the remaining 50% consisting of assets in various niche segments.
Compared to the previous halvings, the only difference in the fourth halving of Bitcoin is the presence of Bitcoin spot ETF, which has even greater influence on the supply-demand dynamics of Bitcoin than halving alone. More institutional investors are starting to include Bitcoin in their portfolios, and these institutional investors have more funds and resources. Their participation can trigger larger-scale market fluctuations.
Since the approval of Bitcoin spot ETF in the United States in January, the weekly inflow of funds into Bitcoin ETF has ranged from $1.2 billion to as high as $2.5 billion, with a cumulative inflow of over $10 billion into the cryptocurrency market.
Currently, the total assets under management of Bitcoin spot ETFs are close to $60 billion, holding 851,000 BTC, accounting for about 4.3% of the total circulating supply of Bitcoin.
The launch of Bitcoin spot ETF has greatly changed the supply-demand dynamics of BTC and established a new benchmark for BTC demand. In essence, ETF has reduced the available supply of BTC in the market through substantial and continuous buying activities.
Glassnode charts show that the amount of Bitcoin absorbed by ETFs from the market far exceeds the amount of Bitcoin mined by miners every day.
Compared to the surge in ETF demand, the impact of newly mined and circulating Bitcoins is becoming smaller and smaller.
Shen Yu also stated that the current market players are different from before. The main feature of this cycle is that incremental funds mainly flow into Bitcoin through ETFs and other channels.
Tags: AI, DeFi, GameFi, IRIS, Ethereum, Bitcoin, Bitcoin halving, Bitcoin Cash, Litecoin.
Source: https://www.chaincatcher.com/article/2121291
Note: The translation is for reference only and does not constitute investment advice.