FILE - An advertisement for the cryptocurrency Bitcoin displayed on a tram, May 12, 2021, in Hong Kong. Sometime in the next few days or even hours, the “miners” who chisel bitcoins out of complex mathematics are going to take a 50% pay cut — effectively slicing new emissions of the world’s largest cryptocurrency in an event called bitcoin halving. NEW YORK — .
Bitcoin “halving,” a preprogrammed event that occurs roughly every four years, impacts the production of bitcoin. Miners use farms of noisy, specialized computers to solve convoluted math puzzles; and when they complete one, they get a fixed number of bitcoins as a reward.Halving does exactly what it sounds like — it cuts that fixed income in half. And when the mining reward falls, so does the number of new bitcoins entering the market.
At the time of the last halving in May 2020, for example, bitcoin’s price stood at around $8,602, according to CoinMarketCap — and climbed almost seven-fold to nearly $56,705 by May 2021. Bitcoin prices nearly quadrupled a year after July 2016’s halving and shot up by almost 80 times one year out from bitcoin’s first halving in November 2012. Experts like McCarthy stress that other bullish market conditions contributed to those returns..
“Even if there’s a slight increase in bitcoin price, can really impact a miner’s ability to pay bills,” Andrew W. Balthazor, a Miami-based attorney who specializes in digital assets at Holland & Knight, said. “You can’t assume that bitcoin is just going to go to the moon. As your business model, you have to plan for extreme volatility.”Better-prepared miners have likely laid the groundwork ahead of time, perhaps by increasing energy efficiency or raising new capital.
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