Key Points
- Bitcoin’s upcoming halving event is estimated to occur in a week, reducing the miner subsidy reward from 6.25 BTC to 3.125 BTC per block.
- Bitcoin mining difficulty has reached an all-time high ahead of the halving, indicating increased mining activity.
The countdown to the next Bitcoin halving event is in its final week, with approximately 1,000 blocks remaining.
Based on Bitcoin’s average block generation time of 10 minutes, the halving is projected to occur on April 20 around 9 a.m. UTC.
Effects of Bitcoin Halving
The halving event will reduce the subsidy reward for miners from 6.25 BTC to 3.125 BTC per block.
These halving events are programmed to occur every 210,000 blocks, approximately every four years.
After a halving event, miners receive 50% fewer bitcoins as a subsidy reward for each block of transactions they mine and add to the blockchain.
However, miners continue to earn additional transaction fee rewards for each block mined.
There have been three previous halving events in Bitcoin’s history, reducing block subsidy inflation from 50 BTC to 25 BTC in 2012, then to 12.5 BTC in 2016, and finally to 6.25 BTC in 2020.
The total number of bitcoins that will ever exist is capped at 21 million.
Halving events will continue until the last bitcoin is expected to be mined around 2140. After this, miners will only earn from transaction fees.
Bitcoin Mining Difficulty and Hash Rate
Ahead of the upcoming halving, Bitcoin mining difficulty has risen 3.9% this week to a new all-time high.
This indicates that miners are increasing their hash rate in anticipation of the block subsidy reward drop.
Bitcoin mining difficulty measures how challenging it is to mine a new block.
It adjusts every 2016 blocks, approximately every two weeks, to ensure that a new block is found approximately every 10 minutes, irrespective of the number of active miners.
Bitcoin’s hash rate, a measure of the total computational power dedicated to the network by miners, reached a new seven-day moving average all-time high of 629.75 EH/s.
While miner revenues have increased this year due to the rise in Bitcoin’s price, the impact of the halving on less efficient mining operations and the overall network metrics following the subsidy drop is yet to be seen.
Bitcoin Halving and Market Fluctuations
Historically, Bitcoin halvings have been associated with significant price fluctuations.
Although there isn’t a direct cause-and-effect relationship, these events have often been followed by substantial bull runs in the Bitcoin market.
Analysts have noted that in two out of three previous halvings, prices surged one and three months after the event. In all three halvings, prices surged nine and 12 months later.
However, the sample size of three is not large enough to be conclusive, and other factors also contributed to the gains following prior Bitcoin halvings.
Bitcoin’s implied volatility for various options expiries suggests potential market turbulence in the near term.
The new U.S. spot bitcoin exchange-traded funds have seen strong overall inflows of $12.6 billion, which could suggest a positive price impact as new supply drops post-halving. However, a bearish reversal could lead to an influx of BTC into the market, creating uncertainty.
