Crypto shares gained in morning trading.
CleanSpark rose over 12%; MicroStrategy rose over 7%; Bit Digital, Coinbase, Marathon Digital rose over 6%.
The next bitcoin halving is expected to occur around April 20, 2024. At this time, the amount of bitcoin created with each block of transactions will fall to 3.125 from 6.25 bitcoin.
Bitcoin mining is the process by which networks of specialized computers race to solve a cryptographic puzzle. The first miner to solve the puzzle earns the right to form the next block of transactions and is compensated with newly issued bitcoin.
The solution to the puzzle is not found strategically, but through a process of brute force guessing. Therefore, each miner's probability of success depends on their proportional share of the network's computing power, also referred to as "hashrate" (See Figure 1). This dynamic incentivizes bitcoin miners to invest in new hashrate. And since blocks are cryptographically linked, reversing a bitcoin transaction requires that a malicious party gain a majority share of the network's hashrate, so the security of the Bitcoin network grows in tandem with the network's hashrate. (Learn more about the evolution of bitcoin's ecosystem.)
The bitcoin halving slows the pace of supply increases at the expense of bitcoin miners, who face a 50% reduction in block rewards (See Figure 2). After the event, the Bitcoin network's hashrate may suffer a temporary decline in response to weakening miner economics, as older, less energy-efficient mining hardware may become unprofitable and removed from operation.
Measuring the impact on miner profitability isn't as simple as measuring the first-order revenue hit, however. Bitcoin's mining algorithm dynamically adjusts its difficulty about every two weeks in response to changing hashrate conditions. If the network's hashrate falls, the difficulty of the cryptographic puzzle will be reduced and the expected bitcoin production per unit of hashrate will increase, and vice versa.
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