Bitcoin (BTC-USD) has dropped over 10% within the past 5 days in anticipation for the "halving" of bitcoin. Halving is when the reward for bitcoin mining is cut in half to reduce the amount of coins in circulation. It happens about every 4 years.

Yahoo Finance's Bradley Smith breaks down what bitcoin halving means and what investors need to keep in mind as it starts.

For more expert insight and the latest market action, click here to watch this full episode.

This post was written by Nicholas Jacobino

Video Transcript

MADISON MILLS: The Bitcoin halving is nearly upon US. Every four years, the reward for Bitcoin mining is cut in half to reduce the amount of coins in circulation. To break down what this means for crypto prices and stakeholders, we have our very own, Brad Smith. Brad.

BRAD SMITH: Hey, yes. One of the largest crypto events just days away. Why does Bitcoin halving happen though? That's the big question that many new holders or whole-dlers might be asking. Well, it helps keep the currency scarce, so it stays valuable. In the past, we've seen the price of Bitcoin rise after the halving, but it's not guaranteed.

On the other hand, not great for miners. Companies like Marathon and Riot-- the rewards that they generate will diminish. And talks of consolidation will probably make its rounds here.

Now take a look at some of these crypto miners that we've got pulled up here on the Yahoo Finance Jumbotron behind me. And one of the huge things, even if you look out more broadly over the year-to-date performance-- all of these companies are down, and down bad.

When you think about the number of companies and the amount of output and energy that they need to continue to make sure happens in order just to mine now a smaller reward for Bitcoin, that places even more pressure on their operating costs. So that thrusts them very much into the conversation of whether or not they could be a target for an acquisition.

But all of these things considered, it's going to be interesting to also track some of the other major cryptocurrencies as well here, because that is noteworthy, especially in the Bitcoin halving, where there is another new event for many potential buyers to enter into the market across the cryptocurrency landscape.

But make no mistake about it, it is another massive event for Bitcoin. And for all of the ETFs that have come about, this makes it even more of an onus on them to know exactly where they're purchasing bitcoins to go or Bitcoin to go into their ETF holdings that they have with new inflows of customers as well or purchasers into those ETFs.

So all of these things considered, Bitcoin year-to-date still up 38%. Larger question of where do we move after this newest halving coming forward in just days. Seana, Matty.

SEANA SMITH: So technical event, but it sounds like it could have a massive ripple effect here when we talk about the prices of Bitcoin and then, of course, the miners and everything that you just laid out there. All right, Brad, great stuff. Thanks so much.