LONDON: Bitcoin enthusiasts were looking forward to the Bitcoin halving on Friday (April 19). This is a change to the underlying technology of cryptocurrencies designed to reduce the rate at which new Bitcoins are created.
Halvings, which occur approximately every four years, were written into the original Bitcoin code by pseudonymous creator Satoshi Nakamoto as a way to slow down the rate of Bitcoin creation.
Chris Ganatti, global head of research at WisdomTree, an asset management company that sells Bitcoin exchange-traded funds, called the halving “one of the biggest events in the crypto industry this year.”
According to CoinGecko’s countdown clock, the halving is scheduled to occur in the early hours of Greenwich Mean Time (GMT) on Saturday.
For some crypto enthusiasts, the halving will emphasize Bitcoin's value as an increasingly rare commodity – Nakamoto has capped Bitcoin's supply at 21 million tokens – while skeptics believe that halving is just a technical change that speculators talk about to drive up the price of cryptocurrencies.
This halving works by halving the rewards that crypto miners receive for creating new tokens, making it more expensive to put new Bitcoin into circulation.
This comes after Bitcoin prices rose to an all-time high of US$73,803.25 in March, spending much of 2023 slowly recovering from the dramatic sell-off in 2022. On Thursday, the world's largest cryptocurrency was trading at US$63,800.
Bitcoin and other cryptocurrencies are being buoyed by excitement over the U.S. Securities and Exchange Commission's decision to approve a Spot Bitcoin exchange-traded fund in January and expectations that central banks will cut interest rates.
Previous halvings occurred in 2012, 2016, and 2020. Some crypto enthusiasts have pointed to the price increase following the halving as a sign that Bitcoin's next halving will push up prices, but many analysts are skeptical.
Analysts at JPMorgan said this week: “We don't expect Bitcoin prices to rise after the halving, as it's already priced in.”
They predict that Bitcoin's price will fall after the halving because it is “overbought” and venture capital funding into the crypto industry has been “subdued” this year.
Financial regulators have long warned that Bitcoin is a high-risk asset with limited real-world applications, but there is a growing movement to approve trading products linked to Bitcoin.
“I’m a little skeptical about the lessons we can learn from past halvings in terms of price prediction,” said Andrew O’Neill, a cryptocurrency analyst at S&P Global.
“It's just one of many factors that drive the price,” he said.
Bitcoin has struggled for direction since its all-time high in March, with geopolitical tensions and expectations that central banks will continue to raise interest rates amid lingering turmoil in global markets. It fell within the week.
