Welcome to the fifth era of Bitcoin.
Following the network's planned reduction of newly minted Bitcoins, a new era of digital scarcity has arrived. Like clockwork on Friday, the rewards miners earn for validating Bitcoin transactions were cut in half for the fourth time since the blockchain's inception.
Bitcoin's so-called halving occurred just after 8pm ET on Friday. As a result, the miner will likely earn him 3.125 BTC per block created until some time in 2028. This is part of miners' dues for solving cryptographic puzzles that help keep Bitcoin's network secure, and will be cut in half again and again until the 22nd century.
While it may seem mundane, Bitcoin's halving is caused by just seven lines of code from Bitcoin's pseudonymous creator Satoshi Nakamoto, but it is central to the nature of the asset. . As Galaxy Digital Analyst Gabe Parker explained On Twitter (aka X), half-life is the “backbone.” [Bitcoin’s] Transparent and predictable monetary policy makes Bitcoin a decidedly rare asset. ”
No one knows what will happen next when it comes to the price of Bitcoin. Historically, however, Bitcoin's price has gained positive momentum after each halving, but it usually did not rise immediately.
But changing macroeconomic conditions, advance knowledge of how the halving will play out, and Wall Street's newly seized investment vehicle make this moment in Bitcoin's history unique. .
Bitcoin’s “most explosive rally” typically occurs 180 days after the halving, Matthew Siegel, head of digital asset research at VanEck, wrote in a recent paper. blog post. On average, the price of Bitcoin increased by 427% from 30 days before the halving to 180 days after the halving. In line with this trend, Bitcoin rose 116% in 2020, from $6,800 to $14,850, the blog post states.
Remember 2020? Bitcoin's third halving, a time when monetary policy was ultra-loose as central banks dealt with a pandemic-era economic slowdown that threatened to disrupt the global economy. It's important to note what happened in 2017, said Desislava Ober, research director at crypto analysis firm Kaiko. Decryption.
“The Fed was easing” prior to past halvings, he said. “For me, the main difference from the most recent halving, the 2020 halving, is the macro environment.”
When U.S. consumer prices soared in 2022, the Federal Reserve stepped in and cut interest rates at a breakneck pace to curb inflation. Financial conditions are relatively tight right now, with markets moving based on expectations of when and how much the Fed will cut interest rates, Aubert said.
“There are many fears, [the Fed] “There could be fewer than three rate cuts this year.” “That would be bad for risk assets and probably for Bitcoin as well.”
Bitcoin hit a new all-time high in March as Wall Street backed spot Bitcoin ETFs despite rising interest rates. Coinbase analysts David Duong and David Hung say products that allow investors to gain bitcoin exposure in traditional brokerage accounts have attracted billions of dollars in inflows since January. He said that it is creating an anchor for Bitcoin demand. I have written March.
“With major institutional investors now able to gain exposure through these vehicles, Bitcoin’s reaction to the upcoming halving may not necessarily reflect its performance in previous cycles. “No,” they wrote, adding that stable demand for the product could lead to lower volatility.
Kaiko’s Aubert said the volatility that characterized previous halvings may also decrease as Bitcoin miners have more experience weathering this event. Typically, some distressed miners are forced to sell their Bitcoin as the production price of Bitcoin effectively doubles.
“I think miners will be better prepared this time,” she said. “They are building liquidity and the sector has consolidated significantly over the past year.”
Charles Chong, director of strategy at crypto mining and staking company Foundry, also shared the prospect of less pain for miners, saying: Decryption The miners had plenty of time to prepare. In a way, it could indicate how far their overall sophistication has reached.
“While the prospect of revenue halving overnight every four years is unprecedented in other sectors, the predictable nature of these events allows for strategic preparation,” he said. Stated. “Overall, halving requires operational improvements and could be interpreted to be bullish in the long term by fostering a more resilient and efficient mining environment.”
Edited by Andrew Hayward
