The impact on the price

A few hours before the start of the fourth halving in history, the price of the cryptocurrency moved in a volatile manner and even briefly plunged to a value of 59 664 USD, but later climbed back up to around 64 000 USD, which was maintained the day after the event. The uptrend continued at the beginning of the new trading week. According to Coin Metrics, Bitcoin gained 1.8 percent to 65 891 USD at that time, and cryptocurrency miners such as Marathon Digital, Riot Platform and Iris Energy also fared well. However, one can still trace a considerable margin from the last all-time highs in mid-March, when the price climbed to more than 73 000 USD. Historically, the price of bitcoin, for example, rose 12 percent during the week after halving in 2020 and has gained 659 percent over the course of the year, according to Reuters.

Predictions for new highs

Coinpedia.com, some experts are of the opinion that the price of bitcoin could climb to the level of 100 to 200 thousand USD by the end of the year. However, estimates for surpassing the 100 000 USD mark are nothing new in the history of the existence of this cryptocurrency. Whether this scenario will become a reality will only be seen in the coming weeks or months. One should also prepare for possible sell-offs when investors will want to collect current profits, which may also be associated with price volatility.

Bitcoin price development over the last 5 years in USD (source: Google Finance) *

The reward for mining has fallen

Halving is a key event in the world of cryptocurrencies, during which the reward for mining this cryptocurrency is halved. During the one last week, the reward was reduced to 3,125 BTC. For comparison - in 2009, when Satoshi Nakamoto created the cryptocurrency, the first reward for mining it was 50 BTC. In fact, Bitcoin was programmed to reduce the issuance of new Bitcoins for every 210,000 blocks mined, which happens approximately every 4 years. The reason for the programming was to create a "sense of scarcity". The reduction of the reward for mining would continue until 2140, when the last bitcoin would be mined, as the total number of bitcoins mined was set at 21 million. Mining requires powerful computers and is also energy intensive, so due to the high technical requirements and decreasing rewards, some miners are gradually leaving the market and being replaced by "bigger fish".

Preparation is essential

Even in the current energy-intensive mining environment, large mining platforms are striving to evolve and innovate their processes. The company Bitdeer Technologies Group has focused on research and development with investments in data centers and cloud offerings with artificial intelligence and mining kits. Other companies such as Stronghold or Riot Platforms are focusing on low-cost energy to give themselves flexibility. Marathon Digital has looked at cost reduction and efficiency from a different perspective and that is through ownership of the infrastructure and sites where they mine. In addition, the company has also focused on energy harvesting, processing methane and biomass into energy that is then purchased by industry or the commercial sector, which also manages to reduce energy costs.

There's that AI again

The boom of artificial intelligence (AI) has also hit the world of cryptocurrencies, as confirmed by digital asset manager CoinShare, which foresees mining companies moving into this sector, in a CNBC report. Several of them are already involved in artificial intelligence, or at least have plans in this sector. These include BitDigital, Hive, Hut 8 or Core Scientific. However, the transition from cryptocurrency mining to the AI sector brings a number of challenges that can be problematic for smaller firms. To do business in this industry requires specialists and a different infrastructure, which is more costly. In fact, an ASIC kit that was specifically created for bitcoin mining is not entirely applicable to broader tasks. Companies like Core Scientific have been adapting by diversifying into AI services for several years, leveraging partnerships and specialized equipment to support high-value computing applications like machine learning. While Bitcoin mining has been a pioneer in such systems, the transition to AI remains challenging with the expectation that only a few operators will successfully navigate the process.

Olívia Lacenová, principal analyst at Wonderinterest Trading Ltd.

* Past performance is no guarantee of future results.