The ‘halving’ of bitcoin, a modification to the cryptocurrency’s core technology intended to slow down the creation of new bitcoins, was something that aficionados were excitedly anticipating on Friday.

The halving, which takes place about every four years, was incorporated into the Bitcoin code at the beginning by the anonymous creator Satoshi Nakamoto as a means of limiting the number of bitcoins that are created.

The halving has been dubbed “one of the biggest events in crypto this year” by Chris Gannatti, Global Head of Research at asset manager WisdomTree, which promotes exchange-traded funds for bitcoin.

As to the countdown clock on CoinGecko, the halving is slated to occur during the early hours of Saturday GMT.

Nakamoto set the limit on the number of bitcoin tokens at 21 million, so for some cryptocurrency enthusiasts, the halving will highlight the worth of this increasingly rare commodity. However, for sceptics, this is little more than a technical gimmick hyped by traders to drive up the price of the virtual currency.

To put it another way, the halving increases the cost of issuing new bitcoins to miners by cutting in half the benefits they get for producing new tokens.

The price of bitcoin saw a significant upswing, reaching an all-time high of $73,803.25, in March 2023, after a sharp decline in 2022. The largest cryptocurrency in the world was trading at $63,800 on Thursday.

Expectations that central banks will lower interest rates, coupled with the euphoria surrounding the U.S. Securities and Exchange Commission’s decision to approve spot bitcoin exchange-traded funds in January, have helped to bolster bitcoin and other cryptocurrencies.

In November of last year, a jury found the former millionaire and creator of a now-defunct cryptocurrency exchange guilty of stealing $8 billion from FTX customers. According to the prosecution, this was one of the worst financial frauds in American history.

There have been three prior halvings: in 2012, 2016 and 2020. Although many analysts are doubtful, some cryptocurrency enthusiasts point to price rises that preceded them as evidence that bitcoin’s next halving will raise its price.

“We do not expect bitcoin price increases post halving as it has been already priced in,” JP Morgan analysts wrote this week.

Since bitcoin is “overbought” and venture capital funding for the cryptocurrency business has been “subdued” this year, they anticipate a decline in price following the halving.

Financial authorities have long cautioned that bitcoin is a high-risk investment with few practical applications, but more are starting to accept trading items that are connected to the cryptocurrency.

S&P Global cryptocurrency analyst Andrew O’Neill expressed his scepticism about the lessons that can be learned about price prediction from past halvings.

“It’s only one factor in a multitude of factors that can drive price,” he stated.

With geopolitical tensions and predictions that central banks will maintain higher interest rates for an extended period of time unsettled global markets, Bitcoin has been directionless since its record high in March and has declined throughout the last two weeks.

(Adapted from ThePrint.in)

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