KEY TAKEAWAYS
The latest bitcoin halving took place on Friday, occurring a little after 8:09 p.m. Eastern Time. This event reduced the rate at which new bitcoins are created to approximately 3.125 every ten minutes.
Despite the significance of this event, its impact on the bitcoin price remains uncertain. Historically, bitcoin halving's have been associated with substantial price increases, but this time, the outcome is less predictable.
Many experts see the bitcoin halving as more of a symbolic event rather than a direct driver of price movements. It serves as a reminder of bitcoin's core value proposition, especially against the backdrop of relatively high inflation rates.
Miners, who play a crucial role in the bitcoin network, are expected to be the most affected by the halving. With a decrease in their revenue due to fewer bitcoins being mined, some miners are exploring alternative strategies to compensate for this loss.
The Bitcoin Halving: What Just Happened?
The fourth bitcoin halving, which everyone was waiting for, happened a bit after 8:09 p.m. Eastern on Friday. Right after the halving, Bitcoin's price stayed pretty much the same, holding steady at around $63,000.
When the halving occurs, the rate at which new bitcoins are made, and the rewards for miners who successfully mine them, get cut in half. Since there's a maximum limit of 21 million bitcoins that can ever exist, having fewer new bitcoins coming in could affect the price of bitcoin. That's why miners and investors keep a close eye on these halving events.
After today's halving, the rate at which new bitcoins are created every 10 minutes is 3.125. These halvings happen every 210,000 blocks, which is roughly every four years. They were planned from the very beginning when the Bitcoin network started in January 2009.
So, what happens during a halving? The reward or subsidy that miners get for validating new blocks of transactions on the Bitcoin network gets cut in half. This reward, called the block subsidy, is the newly-created bitcoin given to the miner as a reward. Now, after the halving, this block subsidy for successful miners is 3.125 bitcoin.
On top of this subsidy, miners also collect fees from the transactions in the block.
The halving block was mined by ViaBTC, and it was the 840,000th block mined on the Bitcoin network. Interestingly, the successful miner earned a bit over 40 bitcoin, which is more than $2.6 million, including the block subsidy and fees, as per data from mempool.space.
Just before this halving block, the total fees earned for validating the blocks were a bit over 7 bitcoins, worth a bit more than $450,000. The reason for this sudden increase is not entirely clear, but it could be that people were willing to pay higher fees to have their transactions included in this special halving block among the 3,050 transactions included.
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What Happens Next?
In the past, after halving events, the price of bitcoin has often gone on to reach new all-time highs in the months following. However, this time around is a bit different. The price of bitcoin had already hit a new all-time high in the months leading up to the halving.
A big part of the recent rise in bitcoin's price was due to the introduction of spot bitcoin exchange-traded funds (ETFs). This might suggest that the demand from this market could have a bigger impact on bitcoin prices than the halving itself.
Kraken's Head of Strategy, Thomas Perfumo, mentioned that this halving also holds symbolic significance. It shows bitcoin's steady, independent monetary policy, especially when many people worldwide are questioning their own currencies and economies.
"At a time when you have people who are looking at their conventional currencies—inflation, interest rates, and the economic environment they live in—they see this alternative form of currency, bitcoin," Perfumo explained to Bloomberg.
However, analysts at JPMorgan and Deutsche Bank have noted that the effects of this halving were already expected and factored into the current bitcoin prices. They don't foresee a major upward movement in the price right after the halving.
According to these reports, the immediate impact of the halving might be felt more in the bitcoin mining sector. With less profitability due to the halving, there could be some consolidation among miners as the overall hash rate (the computing power used to mine bitcoins) might decrease.
Related story Link:
https://www.livemint.com/market/cryptocurrency/bitcoin-halving-scheduled-for-this-weekend-heres-how-it-will-impact-the-crypto-market-11713543294656.html
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