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The Bitcoin network recently underwent its fourth “halving” on Friday, reducing miners’ rewards from 6.25 bitcoins to 3.125. Leading up to this event, the price of bitcoin has shown volatility, dropping approximately 4% for the week and hovering around $64,100, as reported by Coin Metrics.
In the short term, the halving itself is not expected to directly impact the price of bitcoin. However, many investors anticipate significant gains in the coming months based on historical trends. Following the halvings in 2012, 2016, and 2020, bitcoin prices surged by approximately 93x, 30x, and 8x, respectively, from the day of the halving to the peak of each cycle.
This event serves as a critical test for mining companies. JPMorgan analyst Reginald Smith noted that the halving will halve industry revenues, potentially leading to consolidation and closures within the sector. Despite the challenges, this process could rationalize network hashrates and industry expenditures, benefiting the remaining operators.
Hash rates, indicative of the computational power utilized for processing transactions on the bitcoin network, play a crucial role in mining profitability. Companies with higher hash rates stand to gain more revenue opportunities.
Preceding the halving, mining stocks experienced significant fluctuations. While some stocks have declined by double digits in 2024, after notable rallies in 2023, others have demonstrated resilience. For instance, Riot Platforms witnessed a surge of 356% in 2023 but faced a 41% decline in 2024 as of Friday’s market close.
According to Bernstein analyst Gautam Chhugani, the market perceives bitcoin mining stocks as proxies for BTC in the absence of bitcoin ETFs. The halving event could further distinguish winners with low costs and high scalability from smaller miners who might face challenges post-halving.
Mining Stock Performance Comparison (2023 vs. 2024)
| Stock | 2024 YTD Return | 2023 Return |
|---|---|---|
| MARATHON DIGITAL | -30.2% | 586.84% |
| RIOT PLATFORMS | -41.08% | 356.34% |
| CLEANSPARK | 54.4% | 440.69% |
| IRIS ENERGY | -31.68% | 472% |
| CIPHER MINING | -7.63% | 637.50% |
Despite the cautious outlook from analysts like Nikolaos Panigirtzoglou and Marion Laboure, who anticipate a potential near-term decline in bitcoin prices post-halving, speculators may continue to engage with the market. Factors such as overbought conditions, comparisons to gold, and venture capital funding levels could influence price movements.
As bitcoin currently hovers around $64,000, down about 13% from its all-time high in mid-March, the market remains dynamic and responsive to various external factors.