The bitcoin halving, which occurs approximately every four years, involves cutting the rate of newly issued bitcoins by half every ten minutes.

Bitcoin futures, bitcoin halving
Bitcoin Futures

This event, anticipated to happen soon, has historically led to significant price increases in bitcoin. However, there’s uncertainty among analysts regarding its impact this time.

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Bitcoin has already reached all-time highs above $73,000, a first before a halving event, though its price has since retreated to around $63,500.

What’s Going to Happen at the Halving?

After the halving, the reward for bitcoin miners and the rate of new bit coin issuance will decrease by half. This reduction is a predetermined rule established by Bit coin’s creator, Satoshi Nakamoto.

Bitcoin mining involves verifying transactions on the blockchain and creating new bit coins. Miners are rewarded for successfully validating blocks, with the reward consisting of a block subsidy and transaction fees.

The block subsidy, which makes up the majority of the reward, decreases by half after every 210,000 blocks, leading to the upcoming halving reducing the block reward from 6.25 to 3.125 bit coins.

What Does the Halving Mean for Bitcoin’s Price?

The halving affects bit coin’s supply and demand dynamics, often leading to a surge in its price. However, analysts suggest that this halving may be different due to various factors, including the timing of bit coin’s previous all-time high before the halving and the impact of demand from spot bit coin exchange-traded funds (ETFs).

Some believe that the halving is already priced into the market, while others cite concerns about higher interest rates affecting the attractiveness of cryptocurrencies.

Bit coin’s price has been on a downtrend since April 8, experiencing pre-halving jitters. This trend has affected the stock prices of bitcoin miners such as Marathon Digital (MARA), Riot Platforms (RIOT), Hut8 (HUT), Cipher Mining (CIFR), and TerraWulf (WULF), which saw losses but have since regained some ground.

How Stocks may be Affected by Bitcoin Halving

Some analysts propose that the rise in bit coin’s price might counterbalance the decrease in bit coin rewards, although miners may need to seek alternative strategies to bridge the gap in the long run before the next halving cycle.

In terms of Bit coin investors and trading platforms, as of March 18, MicroStrategy (MSTR) held over 214,246 bitcoins in its portfolio, which could significantly influence its stock price if bit coin experiences a downward trend. MicroStrategy shares have seen a decline of one-quarter of their value this month alone.

Any fluctuations related to the halving event could lead to increased trading volumes, potentially impacting trading platforms like Coinbase (COIN) or Robinhood (HOOD).

Nonetheless, even with heightened trading volumes this week, analysts at Needham suggested that the effect of the halving might be overshadowed by larger bit coin volume events for the two trading platforms, as reported by Barron’s.