A bitcoin halving is imminent. Here's what that means.
Bitcoin is expected to go through a "halving" within the next day or two, a preprogrammed event that could impact production of the world's largest cryptocurrency.
A halving, which occurs about every four years, was designed by bitcoin's creator, Satoshi Nakamoto, to effectively reduce by half the reward that miners of the digital token receive. The idea is that by cutting in half the amount bitcoin miners currently make for their efforts, fewer bitcoins will enter the market, creating more scarcity of the cryptocurrency.
That's sparked some speculation that the halving could cause a surge in demand and push up the price of bitcoin, which has already risen almost 50% since year start. Much of the credit for bitcoin's recent rally is given to the early success of a new way to invest in the asset — spot bitcoin ETFs, which were only approved by U.S. regulators in January.
Here's what to know about bitcoin's "halving."
What exactly is bitcoin "halving"?
Bitcoin miners get a fixed reward when they successfully validate a new block on the bitcoin blockchain. That reward is currently 6.25 bitcoin, worth about $402,000, based on today's trading price for the token.
After the halving, miners will receive 3.125 bitcoin for achieving the same goal. As a result, the rate at which new bitcoins enter the market should also fall, slowing the supply of coins. According to limits set by Satoshi Nakamoto, only a maximum of 21 million bitcoins will ever exist, of which more than 19.5 million have already been mined, leaving fewer than 1.5 million left to be created.
When was the last bitcoin halving?
The last such event happened in May 2020, when bitcoin's price stood at around $8,602, according to CoinMarketCap.
By May 2021, the value of bitcoin had surged almost seven-fold to almost $57,000.
When will the next halving occur?
Halving is scheduled to occur regularly after the creation of every 210,000 "blocks" — where transactions are recorded — during the mining process, that are added to the blockchain.
While there aren't any set calendar dates for this to occur, it generally works out to roughly once every four years. The latest estimates expect the next halving to occur sometime late Friday or early Saturday.
What do expert say could happen with bitcoin's price after the next halving?
Some believe that it will be a non-event for bitcoin's price because the cryptocurrency has already experienced a big run-up this year.
"Investors, traders and speculators priced-in the halving months ago," said Nigel Green, the CEO of financial services firm deVere Group, in an email. "As a result, a significant portion of the positive economic impact was experienced previously, driving up prices to fresh all-time highs last month."
Still, others say that bitcoin could get a bump, at least longer-term. Growing demand due to the new ETFs, combined with the supply shock of the next halving, could help push bitcoin's price even higher, said Bitwise senior crypto research analyst Ryan Rasmussen.
"We would expect the price of bitcoin to have a strong performance over the next 12 months," he said. Rasmussen notes that he's seen some predict gains reaching as high as $400,000, but the more "consensus estimate" is closer to the $100,000-$175,000 range.
What is the halving's impact on bitcoin miners?
Miners will likely be pressed to become more energy efficient, or may need to raise new capital, experts said.
In its recent research report, Bitwise found that total miner revenue slumped one month after each of the three previous halvings. But those figures had rebounded significantly after a full year, thanks to spikes in the price of bitcoin as well as larger miners expanding their operations.
Time will tell how mining companies fare following this next looming halving. But Rasmussen is betting that big players will continue to expand and utilize the industry's technology advances to make operations more efficient.
—With reporting by the Associated Press.