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So, the Bitcoin halving is done. What happened and what will happen next?
Key points
- The fourth bitcoin halving occurred shortly after 8:09 pm Eastern on Friday, causing the rate of new bitcoin issuance to drop to 3.125 roughly every ten minutes.
- Despite the noteworthy event, it is unclear whether it will lead to a sharp increase in the price of bitcoin as in the past.
- The bitcoin halving can best be seen as a symbolic event more than anything else, as it illustrates bitcoin’s value proposition against the backdrop of relatively high inflation rates.
- Miners are likely to be affected more than anyone due to the loss of revenue, although some miners are exploring other avenues to make up for that shortfall.
The highly anticipated fourth iteration of bitcoin’s halving occurred shortly after 8:09 pm Eastern on Friday. Bitcoin remained stable immediately after the halving, holding steady around $63,000.
After halving, the rate of issuance of new bitcoins and the rewards for successful bitcoin miners are halved. There may only be 21 million bitcoins, and fewer new tokens in circulation could impact bitcoin prices. That’s why the halving is closely watched by both miners and investors.
What happened to this halving?
After today’s halving, the rate of new bitcoin creation approximately every 10 minutes is 3.125. These halving events take place after the validation of 210,000 blocks, or approximately every four years, and were built into the design of the network when it originally launched in January 2009.
After the halving, the block the reward or the subsidy associated with validating each new block of transactions on the Bitcoin network is halved. The block subsidy is the newly created bitcoin that is included in the block as a reward for the associated miner. So, in effect, the block subsidy for successful miners is now 3,125 bitcoins.
In addition to the subsidy, miners also collect any fees associated with transactions in the block.
The halved block was mined by ViaBTC and was the 840,000th block mined on the Bitcoin network. However, it is interesting to note that the successful miner took home just over 40 bitcoins or the equivalent of over $2.6 million in block grants and fees as a reward, according to data from mempool.space.
This fee is much higher than just over 7 bitcoins, worth just over $450,000 earned in total fees for successfully validating blocks immediately preceding the block halving. The reason for this spike is unclear, but perhaps it is people willing to pay higher fees to make their transactions among the 3,050 included in the halving block.
What happens next?
In the past, halvings have led to new all-time highs for the price of bitcoin in the months following the events. However, this time was differentas the price of bitcoin has already reached a new record high in the months leading up to the halving.
Much of the recent rally has been driven by bitcoin exchange-traded funds (ETFs), perhaps an indication that demand created by that market could have a greater impact on bitcoin prices than halving events.
According to Thomas Perfumo, head of strategy at Kraken, there is a certain degree of additional symbolism associated with this halving in terms of illustrating Bitcoin’s apolitical and unwavering monetary policy at a time when many people around the world have questions about their currencies.
“At a time when you have people looking at their conventional currencies — inflation, interest rates and the economic environment that they live in — they see this alternative form of currency, bitcoin,” Perfumo told Bloomberg.
However, analysts at JPMorgan and Deutsche Bank said that the impact of this halving has been largely infused into current bitcoin prices and there is not likely to be a large upward movement in the price afterwards.
According to these reports, the short-term effects of the halving may be limited to the bitcoin mining industry, where consolidation could occur globally. hash rate decreases due to the decrease in profitability.
That said, they are also there directions that miners might have a chance to increase revenue even if the halving doesn’t lead to a price boom. This increase in revenue would come from higher aggregate fees from transactions driven by recent developments such as Sort them AND level two networks.