The fourth Bitcoin Halving has occurred, leading to a 50% reduction in supply inflation and an inherent increase in issuance scarcity. In this edition, we explore the evolution of the Bitcoin network across Epochs with respect to price performance, and fundamental network metrics.

Published to coincide with the 2024 Bitcoin halving, this research article aims to update and inform investors about the risks and opportunities facing the Bitcoin mining industry. Recently, we updated our data primarily based on the Q4 2023 reported figures. We have found that the average production cost per Bitcoin among listed mining companies is now approximately US$53,000.

Significance of the bitcoin halving, impact on miner economics and BTC price

According to Google Trends data, the search keyword "Bitcoin halving" reached a historical high of 100 on Google search at 23:44 yesterday.

According to the latest data from BTC.com, there are less than 4 days left until the fourth Bitcoin block reward halving. There are currently 500 remaining blocks, and the expected halving time is April 20, 2024. So far, the Bitcoin network has experienced three halvings in 2012, 2016, and 2020.

CryptoQuant, a cryptocurrency analysis company, released a research report stating that the supply shock of Bitcoin halving may not have a significant impact on Bitcoin prices as expected. According to CryptoQuant, it is the increased demand from investors holding large amounts of Bitcoin that is the "key driving factor" for Bitcoin prices, rather than the impact of halving. Although Bitcoin halving typically reduces supply, pushing up prices, CryptoQuant pointed out that during the period from 2021 to 2023, there were several instances where the demand from long-term holders exceeded the supply during the same period. The current supply-demand gap is larger than ever before, indicating that even with halving, the impact on Bitcoin prices may not be as significant as in the past. In addition, the total circulation of Bitcoin has dropped to only 4% of the total supply, much lower than the proportion before halving. The open interest (OI) of Bitcoin futures contracts is as high as 783.6 billion US dollars, only 11 days away from halving. RektCapital pointed out that even if Bitcoin prices fall before halving, they may quickly rebound.

According to a report by Fidelity Digital Assets, miners must prepare for the quadrennial reward halving event, which cuts their bitcoin earned by 50%, in order to avoid bankruptcy. They need to maintain their existing hashrate, energy, and real estate while competing with the rest of the network. The months after halving are the most difficult, as bitcoin "plays catch-up to the immediate pay cut," and miners need capital reserves to offset the drop in revenue. However, the mining sector has historically recovered after previous halvings, demonstrating the resilience of the network and the industry.

Morgan Stanley analysts predict that the price of Bitcoin will fall to $42,000 after the halving due to a reduction in miner rewards and an increase in production costs. The Bitcoin mining industry is expected to further consolidate, with larger miners surviving. The halving event will reduce Bitcoin miner rewards from the current 6.25 BTC per block to 3.125 BTC, which will negatively impact the profitability of miners and lead to an increase in Bitcoin production costs. The production cost of Bitcoin affects its price, and analysts predict that the price will be around $42,000 after the halving.

With less than two months until the next Bitcoin halving, investors are closely watching the price dynamics of the cryptocurrency. Historical analysis of previous BTC cycles suggests that a noticeable correction often precedes halvings, creating the basis for subsequent market takeoff. While Bitcoin has grown by 21.17% since the beginning of 2021, historical patterns suggest a potential correction below $45,000. A well-known analyst in the crypto community recommends buying Bitcoin six months before the halving and selling 18 months after it.

As we get closer to the 2024 halving, Bitcoin is not just surviving; it's evolving. Following the landmark approval of spot Bitcoin ETFs in the United States and changing flows, the very structure of Bitcoin's market is evolving. In this piece, we'll dive into the halving—what it is, why it matters, and its historical impact on Bitcoin's performance. Then, we'll examine Bitcoin’s current landscape, and why it looks so much different than just a year ago.