The Bitcoin network on Friday evening completed its fourth “halving,” reducing the rewards earned by miners to 3.125 bitcoins from 6.25.
The price of bitcoin fell about 4% this week to about $64,100, according to Coin Metrics.
Mechanically, the halving itself shouldn’t affect the price of bitcoin in the short term, but many investors are expecting big gains in the months ahead, based on the cryptocurrency’s performance after previous halvings. After the 2012, 2016 and 2020 halvings, the bitcoin price ran up about 93x, 30x and 8x, respectively, from its halving day price to its cycle top.
The event is a big test for mining companies, however.
“All else equal, the halving will cut industry revenues in half, triggering a wave of consolidation and business closures, while (hopefully) rationalizing the network hashrate and industry capex, which is ultimately good for the remaining operators,” JPMorgan analyst Reginald Smith said in a recent note to investors.
Hash rates are a measure of the computational power used to process transactions on the bitcoin network. The larger a miner’s hash rate, the greater of a revenue opportunity it has.
Mining stocks have been volatile in the days leading up to the event. Many are down by double digits for the year, after rallying between about 300% and 600% in 2023. Riot Platforms, for instance, is down about 41% in 2024 through Friday’s close, but it surged 356% in 2023.
“The market so far has seen bitcoin mining stocks as mere BTC proxies, in absence of bitcoin ETFs,” said Bernstein analyst Gautam Chhugani. “[The] halving would further differentiate the low cost, high-scale consolidating winners vs. rest of smaller miners which may be disadvantaged post-halving.”
Mining stocks in 2023 and 2024
| 2024 YTD | 2023 return | |
|---|---|---|
| MARATHON DIGITAL (MARA) | -30.2% | 586.84% |
| RIOT PLATFORMS (RIOT) | -41.08% | 356.34% |
| CLEANSPARK (CLSK) | 54.4% | 440.69% |
| IRIS ENERGY (IREN) | -31.68% | 472% |
| CIPHER MINING (CIFR) | -7.63% | 637.50% |
Still, speculators may still trade on the event. Another JPMorgan analyst, Nikolaos Panigirtzoglou, said Thursday that he expects the near-term bitcoin price to fall after the halving, citing overbought conditions and prices that are still above the cryptocurrency’s comparison to gold when adjusted for volatility. He also pointed to subdued venture capital funding of crypto projects.
Analysts at Deutsche Bank have a similar view.
“[The] Bitcoin halving is already partially priced in by the market and we do not expect prices to increase significantly following the halving event,” the firm’s Marion Laboure said in a note Thursday, adding that it “has been widely anticipated in advance due to the nature of the Bitcoin algorithm.”
“Looking ahead, we continue to expect prices to stay high,” she added, citing expectations of future spot Ethereum ETF approvals, future central bank rate cuts and regulatory developments.
Bitcoin is currently trading at just under $64,000, roughly 13% off its March 14 all-time high of $73,797.68.
