Bitcoin's 'halving' update successfully implemented, miners affected
The much-anticipated "halving" update to Bitcoin's software has been successfully implemented, dealing a blow to firms profiting from ensuring smooth, secure digital currency operations. This event, which occurs every four years, has halved "mining reward" — the quantity of Bitcoin released from the network to compensate companies known as miners for validating transactions. The change took effect at 8:10pm Friday (NY time), as per data from analytics websites mempool.space and Blockchain.com. Post halving, Bitcoin's price was little changed near $64,000.
A strategy to prevent inflation
The halving mechanism is a pre-planned change in Bitcoin's blockchain code, designed by its anonymous creator, Satoshi Nakamoto. This mechanism was created to maintain a hard cap of 21 million Bitcoin to prevent inflation. As a result of this fourth halving since 2012, the daily reward paid to miners has dropped from 900 to 450 Bitcoin.
Halving sparks bull market predictions amid demand surge
Bitcoin supporters claim this halving could stimulate the latest bull market as it further lowers the supply of new tokens. This comes at a time when demand is increasing from new exchange-traded funds that directly hold the digital asset.
Dilutive effect and macroeconomic influences
The dilutive effect of Bitcoin mining decreases with each halving. Bloomberg's data shows that while the number of tokens mined in the cycle following the first halving, amounted to 50% of Bitcoin outstanding at the time, new supply in the upcoming cycle will amount to just 3.3%. Edward Chin, co-founder of Parataxis Capital, suggested that macroeconomic influences may dampen bullishness toward Bitcoin in the near term.
Impact on Bitcoin mining companies and market consolidation
Halving will impact Bitcoin mining companies more than the actual price of cryptocurrency. The blockchain update could eliminate billions of dollars in annual revenue for miners, though this effect could be offset if the cryptocurrency's price continues to rise. JP Morgan expects the sector to consolidate, with publicly-traded firms gaining market share. "Publicly-listed Bitcoin miners are well positioned to take advantage of the new environment, mainly due to greater access to funding and in particular equity financing," JPMorgan analysts wrote.
