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A Bitcoin Halving Is Coming. Here’s What It Means.
Bitcoin is expected to undergo a “halving” within the next few days, a pre-planned event that could impact the production of the world’s largest cryptocurrency.
The halving, which occurs approximately every four years, was designed by the creator of bitcoin, Satoshi Nakamototo effectively reduce the reward by half digital token miners receive. The idea is that by halving the amount that bitcoin miners currently earn for their efforts, fewer bitcoins will enter the market, creating greater scarcity of the cryptocurrency.
This has sparked some speculation that the halving could cause a surge in demand and push up the price of bitcoin, which has already risen nearly 50% since the start of the year. Much of the credit for bitcoin’s recent rally is attributed to the early success of a new way to invest in the asset: spot bitcoin ETF, which were only approved by US regulators in January.
Here’s what to know about the bitcoin “halving.”
What exactly is the bitcoin “halving”?
Bitcoin miners earn a fixed reward when they successfully validate a new block on the Bitcoin blockchain. That reward is currently 6.25 Bitcoin, or about $402,000, based on today’s trading price of the token.
After the halving, miners will receive 3,125 bitcoins for reaching the same goal. As a result, the rate of new bitcoins entering the market is also expected to decline, slowing down the coin supply. According to the limits set by Satoshi Nakamoto, there will only be a maximum of 21 million bitcoins, of which more than 19.5 million have already been mined, leaving less than 1.5 million to be created.
When was the last bitcoin halving?
The last such event occurred in May 2020, when the price of bitcoin was around $8,602, according to CoinMarketCap.
By May 2021, bitcoin had increased in value nearly sevenfold, reaching nearly $57,000.
When will the next halving occur?
The halving is scheduled to occur regularly after 210,000 “blocks” (where transactions are recorded) are created during the mining process, which are added to the blockchain.
Although there is no set calendar date for this event, it typically occurs about once every four years. The latest estimates are that the next halving will occur late Friday or early Saturday.
According to experts, what could happen to the price of Bitcoin after the next halving?
Some believe that there will be no event for the price of bitcoin, because the cryptocurrency has already seen strong growth this year.
“Investors, traders and speculators priced in the halving months ago,” Nigel Green, CEO of financial services firm deVere Group, said in an email. “As a result, a significant portion of the positive economic impact was experienced earlier, pushing prices to new all-time highs last month.”
Still, others say bitcoin could have an upside, at least in the long term. Rising demand from new ETFs, combined with the supply shock of the upcoming halving, could help push bitcoin’s price even higher, said Ryan Rasmussen, senior crypto research analyst at Bitwise.
“We expect the price of bitcoin to perform strongly over the next 12 months,” he said. Rasmussen notes that he has seen some predict earnings reaching $400,000, but the “consensus estimate” is closer to the $100,000 to $175,000 range.
What will be the impact of the halving on bitcoin miners?
Experts say miners will likely be pressured to become more energy efficient or may need to raise new capital.
In its recent research report, Bitwise found that total miner revenues plummeted a month after each of the three previous halvings. But those numbers have rebounded significantly a full year later, thanks to spikes in bitcoin’s price and larger miners expanding their operations.
Time will tell how mining companies fare after this upcoming halving. But Rasmussen is betting that the big players will continue to expand and use the industry’s technological advances to make operations more efficient.
—With the cooperation of the Associated Press.