why this halving is very different from the previous ones

This Saturday, April 20, bitcoin will experience a new halving. A challenge for miners who will see the reward allocated halved.

After 2012, 2016 and 2020, bitcoin will undergo a new halving on Saturday April 20. Technically, nothing changes, and this new halving will not be different from the previous ones. The rules have been the same since the creation of the first bitcoins in 2009. For every 210,000 blocks created, the quantity of new bitcoins issued on the markets is halved. An event that takes place roughly every four years.

In 2012, the reward allocated to miners for creating a block increased from 50 bitcoins to 25, in 2016 from 25 to 12.5, and since 2020 the reward has been 6.25 bitcoins. Saturday morning, it will therefore only be 3.125 bitcoins.

ETFs are a game changer

A decreasing reward and therefore a new challenge for miners: they will have to face a halving of their turnover overnight. And this prospect worries some investors: as the halving approaches, we are seeing a fall in the stock market of the main bitcoin mining companies.

The halving is however predictable, it is an event that most miners anticipate. Previous times, miners had to sell significant quantities of bitcoin to compensate for the drop in their income, or even temporarily or permanently cease their activity, as they could not afford to mine at a loss.

But last January, the arrival of several spot bitcoin ETFs in the United States may have changed the situation for this halving. These ETFs, awaited by certain players for more than ten years, allowed bitcoin to beat its historical record before the halving, which had never happened. At this stage of the cycle, the price of bitcoin is therefore proportionally higher than at previous times. Under these conditions, what will happen during this halving? Two scenarios are now possible.

• A limited increase in price

With a lot of liquidity entering particularly early in the cycle via ETFs, this could limit the amount left to enter the market after the halving, as was usually the case.

“Unlike 2012 where the halving was a mega event because there was not much attention around bitcoin, in 2024, the event is ETFs”, underlines Pierre Noizat, founder and CEO of Paymium.

Your Money Diary: Halving, are the miners ready? – 04/19

• A more sustained increase in price than usual

Today, most of the big players in mining are now large companies that have access to public and/or private financing. A size that will allow them to maintain their activity for many months, even in the event of loss. And the premature rise in the price of bitcoin could well change the situation, allowing miners who did not anticipate the halving to remain profitable longer than expected.

Another phenomenon is that as the quantity of new bitcoins issued decreases, miners can compensate by earning, with the growing adoption of bitcoin, more and more network fees. For these reasons, fewer bitcoins could be sold by miners, which would create less selling pressure than usual at this time.

In previous halvings, the price of Bitcoin appreciated significantly after the halving, but it took several months. In any case, for Pierre Noizat, founder and CEO of Paymium, the halving will in 2024 be “more of a celebration than an event”, the celebration of “the invention of scarcity in the digital world”.