The Bitcoin network recently underwent its fourth halving
The Bitcoin network recently underwent its fourth "halving," marking a reduction in miners' rewards from 6.25 bitcoins to 3.125. Preceding this event, Bitcoin's price exhibited volatility, experiencing a 4% decline throughout the week to settle around $64,100.
While the halving itself isn't expected to immediately impact Bitcoin's price, many investors anticipate substantial gains in the coming months, drawing parallels from previous halving cycles. Historically, post-halving periods have seen significant price surges: following the halvings in 2012, 2016, and 2020, Bitcoin's price skyrocketed approximately 93x, 30x, and 8x, respectively, from halving day to peak.
JPMorgan analyst Reginald Smith noted that the halving will halve industry revenues, potentially leading to consolidation and closures within the sector. This may also rationalize network hash rates and industry capital expenditures, ultimately benefiting surviving operators.
Hash rates, indicative of computational power for processing transactions, play a crucial role in mining profitability. Higher hash rates translate to greater revenue opportunities for miners.
The lead-up to the halving saw volatility in mining stocks, with many experiencing double-digit declines for the year. Despite rallying significantly in 2023, stocks like Riot Platforms faced a downturn in 2024, shedding about 41% year-to-date.
JPMorgan's Nikolaos Panigirtzoglou expects a near-term decline in Bitcoin's price following the halving, citing overbought conditions and prices exceeding comparisons to gold when adjusted for volatility. Additionally, subdued venture capital funding of crypto projects adds to this sentiment.
Similarly, Deutsche Bank analysts, suggest that the market has already priced in the Bitcoin halving, and significant price increases immediately post-event are not expected. However, they anticipate sustained high prices, citing factors such as potential approvals of spot Ethereum ETFs, future central bank rate cuts, and regulatory developments.
As of now, Bitcoin is trading just under $64,000, approximately 13% lower than its all-time high reached on March 14 at $73,797.68.