Bitcoin Halving Reduces New Supply and Threatens Mining Companies: The awaited update to Bitcoin software,
known as “halving,” has concluded, potentially dealing a blow to companies
that profit by ensuring the digital currency operates efficiently and safely.
This event, occurring every four years, halves the mining reward,
meaning the number of Bitcoins the network issues to reward mining companies for validating transactions.
This adjustment took effect at 8:10 PM on Friday, New York time,
according to data from “mempool. space” and “Blockchain.com”.
There was no significant change in the price of Bitcoin, which remained close to $64,000 after the halving.

Content:

What does halving mean for Bitcoin

How will halving affect the computing power of the Bitcoin network

Halving protects Bitcoin from inflation

Bitcoin’s price stability

Optimism about Bitcoin

The biggest losers are Bitcoin miners

The next halving

What does halving mean for Bitcoin?

Bitcoin halving occurs approximately every four years, during which the reward for creating new blocks is reduced by about 50%.
This procedure is part of Bitcoin’s design to decrease its availability and maintain its scarcity over time.
The next reduction will decrease the block reward from 6.25 Bitcoins to 3.125 Bitcoins.

How will halving affect the computing power of the Bitcoin network

Studies from Bernstein suggest a potential 7% decrease in the network’s computing power after the halving.
However, strong Bitcoin prices and additional income from network fees
are expected to mitigate the impact of major disruptions on mining activities.

Halving protects Bitcoin from inflation

This change in rewards is an intentional and pre-programmed part of the code that manages the Bitcoin blockchain.
Satoshi Nakamoto, believed to be the founder of Bitcoin,
designed the halving mechanism to ensure that the total number of circulating coins does not exceed 21 million,
aiming to protect the cryptocurrency from inflation.
This halving, the fourth since 2012, will decrease the daily rewards provided to miners from 900 to 450 Bitcoins.

Bitcoin enthusiasts expect the halving to be a positive driver for market growth,
reducing the supply of new coins while demand increases,
especially from new exchange-traded funds (ETFs) that deal directly in digital assets.
Major cryptocurrency advocates, like Michael Saylor, CEO of MicroStrategy,
describe Bitcoin as a better store of value than traditional fiat currencies, which are more susceptible to inflation.

However, despite Bitcoin’s price reaching record levels after previous halvings,
analysts at institutions like J.P. Morgan Chase & Co and Deutsche Bank
believe the market has largely already factored in the event to a great extent,
suggesting that Bitcoin’s value may not rise significantly afterward.

Bitcoin’s Price Stability

Cook Ki Chung, CEO of “Asia Next,” based in Singapore and serving
as an exchange for digital assets for institutional investors, stated:
“As expected, the market had already fully accounted for the halving, so the price movement was limited.
Now, the industry must wait to see if there will be an increase
in the coming weeks amid continued institutional interest.”
Despite the fact that the price of the largest cryptocurrency did not change much after the event,
the average transaction fees on the network jumped
by more than 730% to $250 before dropping to $164, according to CryptoQuant data.

It’s important to note that the impact of the reduction in Bitcoin mining decreases with each halving.
While the coins mined in the cycle following the first halving represented 50%
of the Bitcoins in circulation at that time, the new supply in the next cycle will only be about 3.3%,
according to Bloomberg data.

Optimism about Bitcoin

On the other hand, optimism about Bitcoin may decrease in the short term due to
macroeconomic conditions such as delays in the Federal Reserve’s interest rate cuts and conflicts in the Middle East,
as indicated by Edward Chin, co-founder of Parataxis Capital.
Chin added, “We will likely see a slight retreat in the next quarter until the macroeconomic situation is clearer.
During this period, the main price driver is expected to be the flows from exchange-traded investment funds.”

The Biggest Losers Are Bitcoin Miners

The halving is expected to majorly impact Bitcoin mining companies,
not necessarily on the cryptocurrency’s actual price.
Blockchain updates could erase billions of dollars in annual revenues for miners,
although the impact may be limited if the currency’s price continues to rise.

Bitcoin mining is an energy-intensive process, with miners using specialized computers to validate transactions on the blockchain.
Major Bitcoin mining companies like “Marathon Digital Holdings” and “Riot Platforms”
have spent billions of dollars to secure electricity, purchase mining equipment, and build data centers.

J.P. Morgan expects companies in the sector to move towards mergers and acquisitions,
with publicly traded companies gaining a market share.
According to a note from J.P. Morgan analysts this week, publicly listed Bitcoin miners
are well-positioned to benefit from the new environment, mainly due to increased access to financing,
particularly equity financing, which helps them expand their operations and invest in more efficient equipment.

The next halving

The previous halving operations were completed without any significant disruptions to Bitcoin’s blockchain operations.
The next halving is expected in 2028 when the reward for the miner
who successfully processes a block of transaction data will be reduced to 1.5625 from 3.125.
It is expected that 64 Bitcoins will be halved before reaching the maximum of 21 million around the year 2140.
At this time, the operations will stop, and the blockchain will cease issuing new tokens.

When that happens, Bitcoin miners will rely on transaction fees as another source of income in addition to rewards.
An increase in transaction fees might help some miners continue as the rewards diminish,
although these fees constitute only a small portion of their total revenues.

Bitcoin Halving Reduces New Supply and Threatens Mining Companies

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