Key information before the Bitcoin halving

The upcoming Bitcoin halving, where the issuance of new bitcoins every ten minutes is halved, is expected this weekend. Historically, this event has often led to substantial price increases for Bitcoin, although analysts' predictions vary this time. Last month, Bitcoin reached unprecedented highs surpassing $73,000 before retracing to around $63,500 recently, having dipped below $60,000 on Wednesday.

What happens during the Bitcoin halving?

Following the halving, the reward for bitcoin miners and the rate of new bitcoin creation will decrease by half. This rule, established by Bitcoin's creator Satoshi Nakamoto, is a fundamental aspect of the network's design. Essentially, bitcoin mining involves verifying transactions on the blockchain and minting new bitcoins. Miners receive rewards for successfully validating transaction blocks, comprising a block subsidy and transaction fees. Initially set at 50 bitcoins in 2009, the block reward halves approximately every four years after 210,000 blocks. The upcoming halving will reduce the block reward from 6.25 bitcoins to 3.125 bitcoins.

Impact of the Bitcoin halving on price

The Bitcoin halving, known in advance by the market, reduces the rate of new bitcoin creation by 50%, altering supply and demand dynamics for the cryptocurrency. Historically, Bitcoin's price has surged to new highs following previous halving events. However, analysts suggest this halving may not follow the same pattern due to unique factors. Before the halving, Bitcoin reached an all-time high in its current cycle, driven by demand from spot bitcoin ETFs. Some analysts argue that this increased demand, coupled with reduced supply post-halving, could push prices higher. Yet, others believe the halving's impact is already factored into current prices and foresee limited post-halving price increases, influenced by factors such as higher interest rates making cryptocurrencies less attractive. Despite recent price declines, similar trends occurred before past halvings, eventually leading to new price highs in subsequent years.

Impact of Bitcoin halving on stocks

Bitcoin halving could affect three categories of stocks: miners, companies holding bitcoin, and trading platforms.

Bitcoin mining stocks

The halving reduces mining rewards, potentially impacting revenues and stock prices of miners like Marathon Digital (MARA), Riot Blockchain (RIOT), Hut8 (HUT), Cipher Mining (CIFR), and TerraWulf (WULF). Following a recent bitcoin price decline starting April 8, these stocks initially dropped by about 20%, though they have shown some recovery. Analysts speculate that higher bitcoin prices could mitigate reduced rewards, but miners may need long-term strategies to compensate before the next halving cycle.

Impact of Bitcoin halving on investors and trading platforms

MicroStrategy (MSTR) holds more than 214,246 bitcoins as of March 18, a substantial position that could influence its stock price negatively if bitcoin prices decline. MSTR shares have decreased by 25% this month.

Any volatility stemming from the halving could result in increased trading volumes, potentially affecting platforms like Coinbase (COIN) and Robinhood (HOOD). Despite potential volume increases this week, analysts at Needham suggested that larger bitcoin-related events may overshadow the halving's impact on these trading platforms, as reported by Barron's.