Expected step taken: Halving has hardly moved the Bitcoin price so far

Expected step taken
Halving has barely moved the Bitcoin price so far

April 20, 2024, 4:08 p.m

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Approximately every four years, the amount of Bitcoin paid out during mining for a certain amount of computing power decreases. This throttling has so far led to price increases for the cryptocurrency. Last night it happened again – but so far without any notable effects.

The most important cryptocurrency Bitcoin has shown little change after the eagerly anticipated production cutback – the halving. The price was $63,542 around midday (CEST) on Saturday, 0.5 percent lower. Experts like Chris Gannatti of WisdomTree had described the phenomenon, which is scheduled to occur about every four years, as “one of the biggest events in the crypto world this year.”

There had been speculation in advance about a price increase. Enthusiasts referred to limiting the amount of Bitcoin in order to prevent inflation. Critics, on the other hand, spoke of a simple technical change that was being hyped up by speculators in order to drive up the price.

During halving – literally “halving” – the production of new Bitcoin is throttled. With this form of cryptocurrency, the information about a transaction is stored one after the other in encrypted data blocks. So that these processes can be checked, users provide computing capacity. This incurs costs for electricity, for example. As a reward, they receive newly created Bitcoin – a process known as “mining”.

Previous halvings led to price increases

To ensure that there is no inflation with Bitcoin, the maximum number of digital coins was limited to 21 million from the outset. Halving is the mechanism that ensures that this limit is not broken. After 210,000 newly created digital coins, the miners’ reward is halved. If costs remain unchanged, this makes the move financially less attractive and thus reduces Bitcoin production.

There are currently around 19 million Bitcoin in circulation, and the maximum amount is expected to be reached in 2140. The exact time of a halving is therefore not technically fixed. So far it has happened every four years – 2012, 2016, 2020 and now on Friday. During previous halvings, the Bitcoin price subsequently rose. After the throttling on May 11, 2020, the price rose by around twelve percent in the following week and by 659 percent in the following twelve months. In July 2016, the price of Bitcoin increased by around 1.3 percent the next week, but fell again a few weeks later before rising again.

Some observers see a causality: Since the supply of Bitcoin is no longer growing as much, there is a shortage that is leading to a higher price. Skeptics counter that the halving has already been priced in as a predictable step.