Bitcoin is on the brink of experiencing a “halving” event in the next day or two, a programmed occurrence that could have an impact on the production of the leading cryptocurrency globally.
The concept of halving, which takes place approximately every four years, was integrated by the originator of bitcoin, Satoshi Nakamoto, to halve the reward granted to miners of the digital currency. The intention behind this strategy is to reduce by half the current rewards received by bitcoin miners, thereby decreasing the influx of bitcoins into the market and fostering scarcity of the cryptocurrency.
This development has fueled speculation that the halving might drive a surge in demand and subsequently increase the price of bitcoin, which has already escalated by nearly 50% since the beginning of the year. A significant portion of the credit for the recent upsurge in bitcoin’s value is attributed to the initial success of a novel investment approach for the asset — spot bitcoin ETFs, which obtained regulatory approval from U.S. authorities in January.
Here’s a breakdown of what you need to understand about bitcoin’s impending “halving.”
What Does Bitcoin “Halving” Entail?
When bitcoin miners successfully validate a new block on the bitcoin blockchain, they receive a fixed reward. Presently, this reward stands at 6.25 bitcoin, equivalent to about $402,000 based on the current trading price of the token. Following the halving, miners will be entitled to 3.125 bitcoin for accomplishing the same task. Consequently, the rate at which new bitcoins are introduced into circulation is expected to decrease, thereby slowing down the coin’s supply. As per the limits established by Satoshi Nakamoto, the maximum number of bitcoins that can ever be mined is capped at 21 million, with over 19.5 million already in circulation, leaving less than 1.5 million bitcoins yet to be generated.
Previous Bitcoin Halving Occurrences
The most recent halving event occurred in May 2020 when bitcoin was valued at approximately \(8,602, according to CoinMarketCap. By May 2021, the price of bitcoin had surged nearly sevenfold to nearly \)57,000.
When Will the Next Halving Take Place?
Halving is slated to occur periodically after every creation of 210,000 “blocks” — where transactions are recorded — during the mining process and subsequently added to the blockchain. While there are no fixed calendar dates for this event, it typically transpires roughly once every four years. The latest projections suggest that the upcoming halving is anticipated to unfold sometime late Friday or early Saturday.
Expert Predictions on Bitcoin’s Price Post-Halving
Opinions vary regarding the potential impact of the next halving on bitcoin’s price, with some asserting that it may not significantly affect the cryptocurrency’s value due to the substantial surge it has already undergone this year. Nigel Green, CEO of deVere Group, stated that market participants had factored in the halving months ago, leading to a surge in prices to record highs last month. Conversely, others believe that bitcoin could witness a positive trajectory in the long run. Ryan Rasmussen, a senior crypto research analyst at Bitwise, anticipates a robust performance for bitcoin over the next year, with price forecasts ranging from \(100,000 to \)175,000, although some predictions suggest even higher gains up to $400,000.
Impact of Halving on Bitcoin Miners
Experts predict that miners may need to enhance energy efficiency or seek additional funding to adapt to the changing landscape. Bitwise’s recent research indicates a decline in total miner revenue one month after each of the three previous halving events. However, these figures rebounded significantly after a year, attributed to spikes in bitcoin’s price and the expansion of operations by major mining entities.
The future performance of mining companies post the impending halving remains uncertain, but Rasmussen is optimistic that prominent players will continue to grow and leverage technological advancements within the industry to enhance operational efficiency.
—With reporting by the Associated Press.
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Aimee Picchi
Aimee Picchi, the associate managing editor for CBS MoneyWatch, specializes in covering business and personal finance. With previous experience at Bloomberg News and contributions to national news outlets such as USA Today and Consumer Reports.