
This
year’s
halving
—
the
quadrennial
slashing
of
the
amount
of
new
bitcoin
(BTC)
entering
into
circulation
—
may
be
the
most
important
since
the
first
one
around
12
years
ago.
And
yet,
despite
intense
interest
in
the
event,
its
price
impact
may
be
more
muted
this
year
than
previous
halvings.
Recently
launched
protocols,
like
Ordinals,
and
an
increasingly
robust
mining
sector,
mean
the
effect
could
be
relatively
soft.
This
article
is
part
of
CoinDesk’s
“Future
of
Bitcoin”
package.
The
Bitcoin
halving,
expected
to
take
place
late
Friday
night
or
early
Saturday
(April
20),
comes
with
heightened
expectations.
In
each
previous
case
so
far,
the
halving
preceded
massive
sector-wide
rallies.
There
is
an
ongoing
debate
whether
the
halving
is
“priced
in,”
or
whether
the
reduced
amount
of
bitcoin
entering
into
circulation
(this
time
dropping
from
around
900
BTC
per
day
to
450
BTC)
will
create
a
kind
of
supply
shock
that
will
drive
prices
up
(assuming
demand
for
bitcoin
remains
constant
or
increases).
There
are
two
economic
theories
that
explain
this
debate.
On
one
side
are
those
who
believe
the
halving
is
priced
in
believe
the
efficient
market
theory.
They
say
because
the
event
is
known
in
advance,
and
everyone
shares
the
same
information,
it
is
impossible
that
bitcoin
is
currently
undervalued.
On
the
other
side
are
those
who
point
to
the
historic
four-year
boom
and
bust
cycle
in
crypto
and/or
the
aforementioned
supply-and-demand
constraints.
Whatever
theory
you
believe,
it’s
worth
noting
that
this
Bitcoin
halving
is
already
markedly
different.
For
one,
it’s
the
first
time
in
Bitcoin
history
that
bitcoin’s
price
has
increased
before
the
event.
That’s
largely
because
of
the
launch
of
nearly
a
dozen
spot
bitcoin
exchange-traded
funds
in
the
U.S.,
which
have
been
vacuuming
up
bitcoin
at
unprecedented
rates.
BlackRock’s
bitcoin
fund,
for
instance,
has
the
fifth-fastest
inflows
of
any
ETF
so
far
this
year.
“There’s
more
work
to
do,
but
the
industry
has
made
significant
progress
in
making
bitcoin
more
accessible
and
easier
to
use
since
2020,”
Miles
Suter,
Bitcoin
product
lead
at
Cash
App,
told
CoinDesk
in
an
email.
“While
the
recent
rally
has
been
led
by
institutional
investors,
with
past
halvings
we’ve
seen
a
positive
sentiment
shift
in
the
market
that
attracts
new
retail
traders;
I
think
the
cycle
will
repeat
itself.”
What’s
different?
The
institutions
The
institutionalization
of
bitcoin
has
another
element
over
and
above
changing
the
kinds
of
buyers
of
bitcoin
(or
the
way
they
enter
the
market):
It
also
serves
to
legitimize
the
sector.
In
previous
years,
the
biggest-name
buyers
of
bitcoin
were
Michael
Saylor’s
relatively
unknown
software
company
MicroStrategy,
known
bitcoin
fan
Jack
Dorsey’s
Block
and
Elon
Musk’s
Tesla,
which
partially
walked
back
its
commitment
due
to
environmental
concerns.
ETFs
changed
that
forever.
This
isn’t
to
suggest
that
Wall
Street
doesn’t
have
its
detractors,
but
it
is
significant
that
firms
like
BlackRock,
Fidelity,
Franklin
Templeton,
VanEck
and
WisdomTree
were
all
clamoring
to
be
first
to
market
in
offering
a
traditional
onramp
into
this
nascent
digital
economy.
Bitcoin,
once
thought
to
be
the
Wild
West,
is
becoming
normalized
—
and
no
one
is
quite
sure
what
is
on
the
other
side.
“The
people,
institutions
and
governments
that
matter
in
the
big
picture
are
only
*just
beginning*
to
wake
up
to
Bitcoin,”
Lane
Rettig,
founder
of
SpaceMesh
and
former
Ethereum
developer,
said.
“Yes,
this
process
takes
a
painfully
long
time,
longer
than
we
expect
or
would
like
–
it’s
like
a
dragon
slowly
awakening,
and
right
now
it’s
just
begun
to
stir.”
It
was
a
point
echoed
by
Nelson
Rosario
of
Rosario
Tech
Law,
who
views
the
halving
as
just
the
latest
thing
to
drive
attention
to
Bitcoin.
“I
think
the
questions
I’ve
seen
around
this
halving
somewhat
miss
the
point.
The
fact
is
Bitcoin
is
at
all-time
high
levels.
It
is
a
semi-regular
news
story
in
the
financial
press,
and
yet
mass
adoption
still
feels
years
away,”
he
said.
Macroeconomic
factors
Indeed,
analysts
at
both
JPMorgan
and
Goldman
Sachs
this
week
published
reports
dampening
the
idea
that
the
halving
will
bring
in
new
buyers.
A
rallying
market
leading
into
the
halving
may
be
a
way
to
generate
buzz,
but
it
may
have
also
“pulled
forward”
a
portion
of
“the
typical
post-halving
rally,”
JPMorgan
analysts
Reginald
Smith
and
Charles
Pearce
wrote.
More
importantly,
macroeconomic
conditions
in
2024
are
completely
different
than
during
the
preceding
decade
of
low
interest
rates
and
low
inflation.
Goldman’s
Fixed
Income,
Currencies
and
Commodities
as
well
as
Equities
teams
wrote
that
the
higher
interest
rates
today
may
make
high
risk
investments
like
crypto
less
attractive.
It’s
a
point
bolstered
by
BTC’s
performance
this
week
following
news
the
Federal
Reserve
is
reversing
course
from
lowering
interest
rates,
which
would
have
brought
liquidity
into
the
economy.
Price
predictions
from
market
analysts
vary
wildly,
with
some
saying
bitcoin
could
fall
to
as
low
as
$40,000
post
halving
or
rally
above
$150,000
by
the
end
of
the
year.
Pseudonymous
trader
Poordart
gave
a
“primitive
calculation”
adding
to
the
idea
that
bitcoin
could
fall
following
the
halving.
“Assuming
miners
sell
all
mined
bitcoin
eventually,
reducing
the
average
daily
number
of
bitcoin
mined
from
900
to
450
($54
million
to
$27
million
at
current
prices)
should
have
some
effect
—
$189m
inflow
per
week
less
required
just
to
keep
price
stable,”
he
told
CoinDesk.
Bitcoin’s
50%
price
gains
this
year
seem
to
support
the
idea
that
people
are
willing
to
take
risks
—
though
that
doesn’t
mean
traders
shouldn’t
proceed
with
caution.
To
some
extent,
the
stakes
of
this
halving
are
even
more
unclear
than
ever
due
to
these
institutionalization
and
macroeconomic
trends,
with
some
concerned
that
the
halving
distracts
from
the
ultimate
mission
of
Bitcoin.
“It
is
an
odd
thing
to
have
to
treat
very,
very
human-made
events
as
if
they
are
acts
of
nature
or
God,”
Nathan
Schneider,
professor
of
media
studies
at
the
University
of
Colorado
Boulder
and
author
of
“Governable
Spaces:
Democratic
Design
for
Online
Life.”
“I
long
for
the
day
when
network-native
economies
are
designed
to
serve
human
flourishing,
not
arbitrary
parameters
in
code.”
Others,
like
Sarah
Meyohas,
creator
of
Bitchcoin
and
recent
Satoshi
Nakamoto
inscription
and
hologram
series,
sees
the
halving
as
a
symbol
of
Bitcoin’s
resilience.
“As
we
approach
Bitcoin’s
halving,
I
am
moved
by
the
notion
that
a
few
people
can
shape
the
future
of
an
entire
generation
through
ideas
alone.”
How
the
halving
will
impact
bitcoin
miners
A
mix
of
factors
—
including
halving
the
block
reward,
higher
costs,
cautious
investors
and
an
increasingly
crowded
mining
sector
—
could
be
a
harsh
reality
for
bitcoin
miners
after
the
halving
ramps
up
competition
to
find
the
next
block.
Historically,
the
halving
has
been
a
boon
for
the
price
of
bitcoin,
helping
miners
reap
a
fat
profit
margin.
However,
this
time,
it’s
different
as
publicly-traded
and
private
bitcoin
miners
will
have
to
work
harder
not
just
to
mine
the
next
block
but
also
to
convince
investors
and
the
markets
to
have
faith
in
their
ability
to
make
money.
Heading
into
this
halving,
miners
are
greeted
with
a
cautious
tone
from
investors.
For
instance,
stocks
from
mining
firms
Marathon
Digital,
Hut
8
and
Riot
Platforms
are
down
roughly
33%,
35%
and
46%,
respectively,
this
year.
The
risk
associated
with
bitcoin
mining
is
seen
as
greater
than
alternative
mainstream
ways
to
get
exposure
to
crypto,
including
spot
bitcoin
ETFs,
equities
like
Coinbase
(COIN)
and
the
broad
based
CoinDesk
20
index,
which
are
less
volatile.
To
be
able
to
survive
and
thrive
after
this
halving,
miners
will
need
to
be
efficient,
cash
flow
generating
and
have
proper
treasury
management
in
place,
CryptoQuant
CEO
Ki
Young
Ju
wrote.
He
predicts
that
even
if
bitcoin
remains
at
the
$60,000
price
level
the
current
crop
of
mining
machines
would
become
unprofitable
to
run
for
many
firms
—
leading
to
a
wave
of
bankruptcies.
Unless
they
are
able
to
quickly
deploy
the
latest
generation
of
more
efficient
machines,
Ju
said
that
bitcoin’s
price
will
need
to
rise
to
around
$80,000
for
miners
to
remain
profitable
using
Bitmain’s
S19
XP
mining
machines,
the
most
commonly
utilized
miners
by
U.S.
companies.
Miners
have
already
started
to
replace
their
older-generation
machines
with
newer
ASICs.
However,
having
the
latest
technology
may
not
be
enough
to
appease
investors.
Miners
must
prove
they
can
make
money
by
deploying
capital
efficiently,
cutting
costs,
finding
cheaper
sources
of
power
and
generating
positive
cash
flow
for
shareholders.
Doom
and
gloom?
For
profitable
firms,
the
post-halving
landscape
may
become
a
season
for
mergers
and
acquisitions.
Firms
like
Galaxy
Digital,
with
its
Helios
mining
farm,
the
largest
liquid-cooled
mine
in
the
Northeast,
are
already
buying
up
less
efficient
machines
as
the
cheap
cost
of
electricity
in
West
Texas
makes
it
profitable
to
run
outdated
chips.
It’s
not
all
doom
and
gloom.
Increasingly,
transaction
fees
are
becoming
a
significant
contributor
to
miners.
Historically,
miners
earned
lion’s
shares
of
profit
from
the
block
rewards.
However,
with
the
increasing
ways
to
use
the
Bitcoin
blockchain
—
most
notably
through
the
Ordinals
protocol
—
miners
are
taking
in
more
through
increased
fees.
Another
option,
which
some
miners
have
already
started
to
include
in
their
business
plan,
is
to
diversify
into
other
sources
of
revenue,
such
as
repurposing
existing
data
centers
to
host
computing
resources
for
artificial
intelligence
or
cloud
computing.
While
others
see
the
drop
in
revenues
as
potentially
existential
for
miners,
some
experts
think
that
the
effects
will
be
relatively
muted
compared
to
prior
years.
Some,
like
Colin
Harper,
researcher
and
writer
for
Luxor
Technology’s
Hashrate
Index,
thinks
that
this
could
be
the
first
year
that
there
is
no
dip
in
Bitcoin’s
hashrate,
or
the
amount
of
energy
contributed
to
network
security,
because
prices
have
remained
so
high.
“Mining
margins
won’t
be
as
good
after
the
halving
as
they
are
now,
obviously,
but
they
won’t
be
horrendous,”
Colin
Harper,
researcher
and
writer
for
Luxor
Technology’s
Hashrate
Index,
told
CoinDesk.
“And
if
the
new
Runes
fungible
token
protocol
makes
a
significant
impact
on
transaction
fees,
then
margins
will
be
healthy
enough
to
keep
miners
with
higher
costs
online
for
longer
than
not.”
Launch
of
Runes
As
mentioned,
NFT-like
inscriptions,
made
possible
by
the
launch
of
the
Ordinals
protocol,
have
changed
the
game
for
Bitcoin.
Not
only
has
it
shifted
the
economic
landscape
for
miners,
but
it’s
also
renewed
developer
excitement
in
the
first
cryptocurrency,
which
in
recent
years
was
losing
out
to
chains
like
Ethereum
and
Solana.
This
halving
will
also
see
the
launch
of
the
Runes
protocol,
created
by
Ordinals
creator
Casey
Rodarmor.
The
system,
which
will
allow
tokens
to
be
created,
minted
and
transferred
on
Bitcoin,
is
set
to
launch
immediately
following
the
halving
with
the
goal
of
introducing
greater
utility
to
Bitcoin
—
a
mission
which
started
with
Rodarmor’s
prior
creation,
Ordinals.
Rodarmor
has
described
Runes
as
creating
a
venue
for
meme
coins
on
Bitcoin,
only
with
greater
simplicity
and
efficiency
than
is
currently
provided
by
the
BRC-20
token
standard.
Already,
several
Runes
projects
are
being
planned
to
coincide
with
the
launch
of
the
new
protocol.
Network
security
Although,
in
prior
years,
halvings
did
not
lead
to
an
economic
attack
on
Bitcoin
(like
a
51%
attack),
there
are
some
concerns
that
lower
profitability
could
lead
to
enough
miners
turning
off
that
it
becomes
theoretically
possible.
For
instance,
Bitcoin’s
hash
rate
declined
15%
after
the
2020
halving,
5%
after
2016’s
halving,
and
13%
after
2012,
therefore
making
Bitcoin
less
secure.
“The
halving
is
one
of
the
dumbest
parts
of
how
Bitcoin
was
designed.
If
you’re
going
to
reduce
subsidy
over
time,
the
right
way
to
do
it
is
gradually,
rather
than
shocking
the
system
every
four
years,”
legendary
Bitcoin
Core
developer
Peter
Todd
told
CoinDesk.
“Fortunately
fees
are
getting
higher,
so
the
risk
of
havings
is
reducing.
Hopefully
this
one
goes
alright.”
Rodarmor,
and
others,
see
Runes
as
important
to
the
post-halving
Bitcoin
ecosystem
in
that
it
could
bring
out
additional
demand
for
block
space
—
thereby
bolstering
the
mining
economy.
Higher
fees
for
validating
transactions
could
however
help
to
offset
lower
block
reward
revenue
and
keep
the
hash
rate
higher.
“I
wouldn’t
advocate
changing
the
halving
schedule,
but
if
I
was
going
to
design
Bitcoin
from
scratch,
I
probably
would
not
have
picked
such
a
fast
decay,”
Rodarmor
told
CoinDesk.
“But
you
don’t
go
to
war
with
the
army
you
want,
you
go
to
war
with
the
army
you
have.
And
this
is
the
Bitcoin
we
have.”
Ordinals
was
contentious
among
some
corners
of
the
Bitcoin
community
for
causing
network
congestion
and
soaring
user
fees,
something
Runes
would
also
probably
face
if
it
proves
successful.
“I
don’t
think
that
the
best
and
highest
use
case
for
Bitcoin
is
Runes;
I
think
that
is
bitcoin
itself
as
a
neutral,
value
delivery
network,”
Rodarmor
said.
“However,
I
do
think
that
it
is
good
to
create
sources
of
demand
for
Bitcoin
transactions,
because
ultimately
that
helps
the
security
of
the
network.”
If
all
goes
well,
it
may
not
matter
whether
bitcoin
is
priced
in.