Houston to Earth, the BitcoinBTC

halving is hours away — but the moon is nowhere in sight. This much-anticipated event, which will cut the rewards for mining Bitcoin in half, is expected to make the world’s most valuable cryptocurrency even rarer. And based on forecasts and historical trends, it could set off a new bull run — but will it?

Halve to hold: Bitcoin has gone through this process four times since its inception in 2008. Each time, the number of new coins mined per block gets halved, from 50 Bitcoins to 6.25 by 2020. Every halving has been followed by massive price rallies — a 93x, 30x, and 8x increase in 2012, 2016, and 2020, respectively — from the price on halving day to the peak of that cycle. Now, with Bitcoin having quadrupled to record highs since the lows of 2021, analysts are uncertain if this trend will repeat, especially with interest rate cuts in limbo.

• The amount of new Bitcoin generated in each block will drop to 3.125 BTC, drastically reducing new supply — meaning just 656K new coins will be mined over the next four years (~3% of total supply).
• Some analysts predict that this scarcity, along with the introduction of new Bitcoin ETFs, could drive prices higher. However, JPMorganJPM
  CEO Jamie Dimon argues, “manufactured scarcity doesn’t create any real underlying value.”

With scarcity comes competition

Since the last halving in 2020, the difficulty of mining Bitcoin has increased almost sixfold, while rising electricity costs have also added to miners’ woes, making it harder for them to secure favorable deals from utility companies. As a result, mining companies are hoarding near-record amounts of bitcoin — and CoinShares’ Matthew Kimmell believes that “This is the final push for miners to squeeze out as much revenue as they can before their production takes a big hit.”

• After the halving, the number of bitcoins mined daily will fall from ~900 to 450 — potentially costing the industry $10B in annual revenue.
• Mining stocks like Marathon DigitalMARA
  and Riot BlockchainRIOT
  have already seen their values drop 53% and 54% from earlier highs this year.

Breaking The Cycle (BTC): While previous halvings have typically been bullish for Bitcoin, Goldman Sachs warns that factors like high inflation and interest rates could alter past price trends. But despite warnings, mining CEOs remain optimistic, with Riot’s CEO Jason Les foreseeing “a very positive movement in Bitcoin over the next several months” (BBG).