Four days left before halving. What is the current situation in the cryptocurrency world?

Bitcoin prices have fluctuated violently recently, and on April 14, they once fell below the integer mark of 60,000 US dollars. Affected by this, the crypto market once again ushered in a liquidation amount of over 100 million. As of press time, the price of Bitcoin rebounded to 66,700 US dollars.

It is worth noting that there is less than a week left before the fourth halving of Bitcoin. The halving event will lead to a reduction in miners' rewards, which will directly affect the circulation speed of Bitcoin.

Bitcoin halving cycle

Bitcoin halving usually occurs every four years or every 210,000 produced. When Bitcoin is halved, the newly produced Bitcoin will be reduced by half. In other words, the reward for miners to verify transactions and add them to the blockchain is reduced by 50%.

Bruce Fenton, CEO of Chainstone Labs, said: "One of the most important features of Bitcoin is its limited supply and issuance mechanism, which is why Bitcoin has become the world's most popular cryptocurrency and one of the reasons why it is seen as a means of storing value more similar to gold than fiat currency."

So far, Bitcoin has experienced three halvings.

The first halving: November 28, 2012, block height 210,000;

The second halving: July 9, 2016, block height 420,000;

The third halving: May 11, 2020, block height 630,000.

Forecasts show that the next Bitcoin halving date is before April 20, 2024.

Halving is accompanied by price increases

Basic logic, the reduction in the speed of new Bitcoin output may lead to scarcity, which may push up demand and thus lead to higher Bitcoin prices.

Historically, after the completion of the first three "halving" events, the motivation for Bitcoin mining will weaken, and all of them will be accompanied by a sharp rise in Bitcoin prices. Bitcoin prices rose 8450% in 2012, 290% in 2016, and 560% in 2019. After the next halving, the production cost of Bitcoin is expected to reach about $40,000.

Here is how BTC prices have performed after previous halvings:

First halving: BTC price was around $12. One year later, it reached $1,100, a nearly 10,000% surge since the halving.

Second halving: Bitcoin traded near $670. In December 2017, Bitcoin approached the $20,000 mark, a nearly 3,000% increase in price since the halving.

Third halving: BTC price hovered around $9,500. Since then, it took Bitcoin a year and a half to reach $69,000, a 725% increase.

The situation of "miners"

During the upcoming halving, Bitcoin's reward will drop from 6.25 BTC to 3.125 BTC, which means that the income miners receive from block rewards is effectively cut in half.

This change may lead to a decrease in hash rate, as less efficient miners may find it difficult to cover their costs and thus take their mining equipment offline.

Analysts at Galaxy believe that after the Bitcoin block reward is halved in April, most old mining machines will find it difficult to break even, prompting miners to take them offline.

Looking at historical public data, in 2023, the 7-day average hash rate soared from 255 EH/s to 516 EH/s, an increase of 102%.

The surge in hash rate reflects partly the rise in Bitcoin prices, and partly the purchase of more efficient mining equipment by companies in response to the market.

Currently, miners are in a difficult situation due to declining revenues and rising costs for purchasing new equipment.

Bitcoin ETFs reduce selling pressure

Halving is often seen as a signal of the peak of a bull market, and the market will release a round of selling pressure before the event arrives.

Historical data shows that after the two halvings in 2016 and 2020, Bitcoin prices experienced a sharp decline of about 30%.

However, this year is different. The Bitcoin spot ETF approved by the U.S. Securities and Exchange Commission (SEC) in January 2024 may affect the price trend of the currency after the halving.

In the first quarter of spot Bitcoin ETF trading, the total capital inflow of 11 products approved by the U.S. Securities and Exchange Commission (SEC) reached about $12.1 billion, absorbing a considerable part of the potential selling pressure after the halving. Bitcoin ETFs have balanced the selling pressure caused by the Bitcoin halving to a certain extent by attracting new funds.