This weekend will signify the inaugural bitcoin ‘halving’ event in nearly four years, ushering in a new era for the largest cryptocurrency globally and the magnitude at which it is extracted.

Over the past few months, there has been a remarkable surge in the value of bitcoin, propelled by the introduction of spot price ETFs in the US, propelling gains to unprecedented levels surpassing $70,000.

Although the price of bitcoin has slightly retreated from its pinnacle of $73,805.27 in March, reflecting general volatility in risk asset prices due to escalating tensions in the Middle East, investors are gearing up for the cryptocurrency’s first halving event since May 2020.

This Is Money delves into the concept of bitcoin halving, elucidating why it is occurring now and the potential implications on its valuation.

What is bitcoin mining?

Before delving into the mechanics of halving, it is imperative to grasp how new bitcoins are introduced into circulation.

Bitcoin mining involves the process through which transactions are conducted, ushering new bitcoins into the circulation within a blockchain.

The primary objective of mining is to authenticate transactions to thwart fraudulent activities while appending new blocks to the blockchain ledger.

Bitcoin mining entails utilizing a robust computer to decipher intricate hash puzzles. The initial user, or miner, to decode the puzzle is remunerated with bitcoin.

What is bitcoin halving?

In a move to regulate the influx of new bitcoins, halving transpires after mining 210,000 blocks, culminating in a 50 percent reduction in the reward for successful mining.

This occurrence transpires approximately every four years, ensuring a steady supply of bitcoin, which is capped at 21 million coins.

The upcoming halving is anticipated to occur this weekend.

It is projected that by 2140, the total cap on the available bitcoins will be reached.

Why is this happening?

The rationale behind the design of bitcoin remains somewhat elusive.

As noted by Etoro market analyst Simon Peters, the enigmatic bitcoin creator, Satoshi Nakamoto, maintains an extremely low profile, with the last public statements dating back to 2010.

Numerous speculations suggest that Nakamoto might be a pseudonym adopted by the original creator, or creators, of bitcoin.

Peters posits that the gradual reduction in the circulation of new coins through halving is likely aimed at enhancing the network’s value over time.

He further explains that the upcoming halving will reduce the reward from 6.25 to 3.125 bitcoin per block, effectively lowering the annual supply inflation rate from 1.7 percent to 0.84 percent.

How might halving impact bitcoin’s price?

Bundeep Rangar, the CEO of Fineqia International, asserts that bitcoin halving events have historically been linked to substantial price surges.

He elucidates that the diminished rate of new coin creation leads to a decrease in selling pressure on miners, potentially resulting in a supply deficit and consequent price escalation if demand remains steady or rises.

Jeff Hancock, CEO of Coinpass, notes that halving events typically instigate volatility and heightened interest in the bitcoin market.

However, Hancock anticipates a deviation in the upcoming four-year cycle compared to the previous one, attributing this shift to the current environment characterized by high inflation and interest rates.

Etoro’s Peters echoes the sentiment within the crypto community, suggesting that the imminent halving could propel bitcoin’s price towards the six-figure threshold.

He highlights the contrast from the last halving in May 2020 when the price hovered around £7,000, a fraction of its current value.

With the recent resurgence in investor interest in bitcoin following the approval of spot ETFs earlier this year, many in the crypto sphere anticipate a positive sentiment surrounding bitcoin post-halving, potentially propelling its price towards the $100,000 mark.

When can we expect the subsequent halving event?

While pinpointing the exact date remains challenging, Peters approximates that the next halving is likely to occur towards the end of the first quarter of 2028.

Rangar from Fineqia adds that given an average of 144 blocks mined daily, with each block taking roughly 10 minutes, the subsequent halving should transpire approximately four years from the current event.

Bitcoin was trading below $9,000 before the preceding halving event.