Bitcoin halving on deck – here’s what to expect (Cryptocurrency:BTC-USD)

Bitcoin (BTC-USD) is a little ways away from undergoing a once-every-four-years software update in the blockchain that has historically been hyped as a positive catalyst for the highest-profile cryptocurrency.

The quadrennial halving event, due as soon as Friday, occurs when bitcoin (BTC-USD) miners’ reward for validating transactions is slashed in half, essentially reducing the rate at which new tokens are created by 50%. As such, the technical event reduces the supply of new bitcoins entering the market, a move that could drive up the coin’s price should demand remain constant or rise.

And, given the fixed supply of 21M bitcoins (BTC-USD), the halving event reinforces scarcity by reducing the rate at which new BTCs are introduced into circulation.

If history serves as a guide (that is, the halving has preceded big price gains), the event could boost the price of bitcoin (BTC-USD) to more than $115K, crypto tax-reporting firm CoinLedger said in a study last month. Since there have only been three halvings so far, it should be taken with a grain of salt that bitcoin (BTC-USD) tends to rise after the event. SA analyst Florian Grummes had warned that BTC typically weakens for about 15 to 45 days immediately before and after the halving.

Bitcoin (BTC-USD) had already reached a record high of $73.8K in mid-March, as the green light for spot bitcoin exchange-traded funds (ETFs) has spurred strong and persistent demand for the token. Now, volatility has spiraled amid the countdown to the halving (as well as jitters about higher-for-longer interest rates), with bitcoin dropping some 17% since hitting its record.

H.C. Wainwright analyst Mike Colonnese is in the camp that the halving will prove to be a positive development for the price of bitcoin (BTC-USD). But “the supply shock impact could take months to materialize, and we are now cautious on BTC prices over the short term given geopolitical issues in the Middle East and re-accelerating inflation.”

He wouldn’t be surprised to see BTC retreat to the low-to-mid $50K range over the near-term, before rebounding and resuming its longer-term bull run. Should that come to fruition, he added, “there could be some short-term pressure on mining stocks ((MARA) (RIOT) (HUT)(HIVE)(BTBT)(BITF) if we were to see such drawdown in BTC prices.”

Note that miners’ profitability generally suffers after a halving as their miner reward gets cut in half. This fourth halving will lower the reward to 3.125 BTC from the current 6.25. The overall halving process is expected to end in 2140, when the number of bitcoins (BTC-USD) in circulation are expected to reach its programmed cap of 21M. There are currently about 19.7M BTC in circulation.

Still, publicly-traded miners “are well positioned to take advantage of the new environment, mainly due to greater access to funding and in particular financing,” J.P. Morgan analyst Nikolaos Panigirtzoglou wrote in a Thursday note. “This helps them to scale their operations and invest into more efficient equipment.”

Deutsche Bank’s Marion Laboure argued that bitcoin’s (BTC-USD) price likely won’t see a significant increase post-halving, as the event “is already partially priced in by the market.” The analyst does expect prices to stay high, though, amid expectations of spot ether (ETH-USD) ETF approvals, central bank policy easing and regulatory changes.