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Bitcoin halving is imminent. Here’s what it means.
Bitcoin is expected to undergo a “halving” within a day or two, a pre-scheduled event that could impact the production of the world’s largest cryptocurrency.
The halving, which occurs approximately every four years, was created by the creator of bitcoin, Satoshi Nakamototo effectively reduce the reward that by half digital token miners receive. The idea is that by halving the amount bitcoin miners currently earn for their efforts, less bitcoin 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 given 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.
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Here’s what to know about bitcoin’s “halving.”
What exactly is the Bitcoin “halving”?
Bitcoin miners receive a fixed reward when they successfully validate a new block on the Bitcoin blockchain. That reward is currently 6.25 bitcoins, worth approximately $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 at which new bitcoins enter the market is also expected to decline, slowing the coin supply. Under the limits set by Satoshi Nakamoto, only a maximum of 21 million bitcoins will exist, of which more than 19.5 million have already been mined, leaving less than 1.5 million to be created.
When did the last Bitcoin halving happen?
The last such event occurred in May 2020, when the price of bitcoin stood at around $8,602, according to CoinMarketCap.
By May 2021, bitcoin’s value had increased nearly sevenfold to nearly $57,000.
When will the next halving take place?
The halving is expected to occur regularly after every 210,000 “blocks” – in which transactions are recorded – are created during the mining process, which are added to the blockchain.
While there is no set calendar date for this to occur, it generally occurs approximately once every four years. The latest estimates predict that the next halving will take place between the end of Friday and the beginning of Saturday.
What do experts say could happen to the price of bitcoin after the next halving?
Some believe it will be a non-event for the bitcoin price because the cryptocurrency has already seen a big rally this year.
“Investors, traders and speculators had already predicted the halving months ago,” said Nigel Green, chief executive of financial services firm deVere Group, 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.”
However, others argue that bitcoin could see a rise, at least in the long term. Growing demand from new ETFs, combined with the supply shock from the upcoming halving, could help push the price of bitcoin even higher, said Ryan Rasmussen, senior crypto research analyst at Bitwise.
“We would expect the bitcoin price to have a strong performance over the next 12 months,” he said. Rasmussen notes that he’s seen some predict earnings reaching $400,000, but the “consensus estimate” is closer to the $100,000-$175,000 range.
What is the impact of the halving on bitcoin miners?
Miners will likely be pushed to become more energy efficient, or may need to raise new capital, experts said.
In its recent research report, Bitwise found that total miner revenue plummeted one month after each of the previous three halvings. But those figures had risen significantly after a full year, thanks to spikes in bitcoin’s price and larger miners expanding their operations.
Time will tell how mining companies will fare after the next upcoming halving. But Rasmussen is betting that big players will continue to expand and use the industry’s technological advances to make operations more efficient.
—Reporting by the Associated Press.