Bitcoin 'halving' prompts initial fall against dollar
Bitcoin underwent its third scheduled "halving" yesterday as the value of the rewards paid to the cryptocurrency's miners was reduced from 12.5 to 6.25.
In afternoon trading in New York yesterday, Bitcoin was down 1.3% at $8,620.43
Halving is written into Bitcoin's code, and takes place roughly every four years, or with every 210,000 blocks underwritten on the encrypted blockchain ledger. In the absence of an equivalent of a central bank to regulate their supply, this system counters the risk of inflation and caps the maximum number of Bitcoins in existence at 21 million.
So-called miners of Bitcoin, as with other cryptocurrencies, programme software that essentially races with other miners to solve complex mathematical formulae. The miners who crack the sums (around every 10 minutes) are rewarded with Bitcoins.
Yesterday's halving will have reduced the incentive for miners in the short-term. But further down the line, investors' outlook remains optimistic.
Nigel Green, founder and CEO of deVere Group, pointed out the halving could be advantageous for cryptocurrency investors: "Previous Bitcoin halving events have prompted impressive price climbs. The 2016 halving triggered a 300% jump in the value of Bitcoin."
"There is no reason to believe this time the market will not respond with a longer-term upward trajectory. Indeed, the rally which is likely on its way could potentially be even more dramatic because there is more mass awareness than ever before of the long-term use of and need for digital currencies."
Edward Moya, senior market analyst at OANDA in New York, agreed. Talking to Reuters, Moya said that, longer term, "you're probably going to see higher prices. With all the fiscal and monetary stimulus that's being pumped into the global economy, there's renewed interest from institutional traders looking for alternatives to modern government-backed currencies."
The previous halving, in 2016, prompted a long rise by around 2,500% from mid-2016 to the currency's record high in December 2017 of just under $20,000.
One unit of Bitcoin is valued this morning at $8,810, slightly up on yesterday. Bitcoin has gained more than 20% since the start of the year, nudging $10,000. The next halving will be in 2024.
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