By Elizabeth Howcroft
LONDON (Reuters) – Bitcoin enthusiasts eagerly awaited bitcoin’s ‘halving’ on Friday – a change in the cryptocurrency’s underlying technology aimed at slowing the rate at which new bitcoins are created.
The halving, which occurs approximately every four years, was written into Bitcoin’s code at its inception by pseudonymous creator Satoshi Nakamoto as a way to slow the rate at which bitcoins are created.
Chris Gannatti, Global Head of Research at asset manager WisdomTree, which markets bitcoin exchange-traded funds, called the halving “one of the biggest events in crypto this year.”
According to CoinGecko’s countdown clock, the halving will take place in the early hours of Saturday GMT.
For some crypto fans, the halving will underscore Bitcoin’s value as an increasingly scarce commodity — Nakamoto limited Bitcoin supply to 21 million tokens — while skeptics see it as little more than a technical change that speculators talked about to drive up the price of the virtual currency. to blow.
The halving works by halving the rewards cryptocurrency miners receive for creating new tokens, making it more expensive for them to put new bitcoins into circulation.
It follows a surge in Bitcoin’s price to a record high of $73,803.25 in March, after spending much of 2023 slowly recovering from 2022’s dramatic decline. On Thursday, the world’s largest cryptocurrency traded at $63,800.
Bitcoin and other cryptocurrencies are buoyed by excitement surrounding the U.S. Securities and Exchange Commission’s decision to approve spot-traded bitcoin funds in January, as well as expectations that central banks will cut interest rates.
Previous halvings took place in 2012, 2016 and 2020. Some crypto fans point to subsequent price increases as a sign that Bitcoin’s next halving will increase its price, but many analysts are skeptical.
“We do not expect any price increases for bitcoin after the halving as it is already priced in,” JP Morgan analysts wrote this week.
They expect the price of bitcoin to fall after the halving because it is ‘overbought’ and venture capital funding for the crypto industry is ‘moderate’ this year.
Financial regulators have long warned that bitcoin is a risky asset, with limited real-world applications, although more and more regulators have started approving bitcoin-linked trading products.
Andrew O’Neill, a crypto analyst at S&P Global, said he was “somewhat skeptical about the lessons to be learned in terms of price predictions from previous halvings.”
“It’s just one factor in a multitude of factors that can affect price,” he said.
Bitcoin has struggled to find direction since March’s record highs and has fallen over the past two weeks due to geopolitical tensions and expectations that central banks will keep interest rates higher as long as global markets are jittery.
(Reporting by Elizabeth Howcroft; Editing by Tommy Reggiori Wilkes and Toby Chopra)
