Bitcoin, the world’s largest cryptocurrency, has completed its “halving”, a phenomenon that happens roughly every four years, according to CoinGecko, a cryptocurrency data and analysis company.

Bitcoin was fairly stable immediately afterwards, falling 0.47 per cent to $99,340.

What is it?

Bitcoin enthusiasts had eagerly waited for the halving — a change to the cryptocurrency’s underlying technology designed to reduce the rate at which new bitcoins are released into circulation.

The halving was written into bitcoin’s code at its inception by pseudonymous creator Satoshi Nakamoto.

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”.

For some crypto fans, the halving will underscore bitcoin’s value as an increasingly scarce commodity.

Nakamoto capped bitcoin’s supply at 21 million tokens.

But sceptics see it as little more than a technical change talked up by speculators to inflate the virtual currency’s price.

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The looming halving, though monumental, is expected to be a “price non-event,” according to Nigel Green, CEO of deVere Group, a global independent financial advisor and asset manager.

In the lead-up to the event, implied volatility for the original cryptocurrency has increased, indicating that there might be more price turbulence around this quadrennial event. However, deVere CEO is advising against placing bullish bets on this volatility as the price swings might not necessarily translate into profitable outcomes. 

Green believes that Bitcoin’s impending reward halving, slated for today or tomorrow, is unlikely to cause a volatility explosion and its impact on price will be minimal.

“While the haliving is a pivotal moment in the cryptocurrency world, it likely won’t significantly affect Bitcoin’s value immediately. Much of the positive economic impact was likely priced in months ago when investors, traders, and speculators anticipated the event, which drove the price to new all-time highs last month,” Green explained.

Bitcoin reached a record-breaking $75,830 on March 14, 2024, ahead of the halving. However, Green suggests that the true value of the halving will only become apparent over a longer term: 

“The reduction in new supply enhances Bitcoin’s scarcity, reinforcing its status as a store of value. This narrative will likely have a more profound influence on Bitcoin’s price trends and investor sentiment over time than the immediate effects of the halving.” 

The effects of Bitcoin’s reward halving on its native cryptocurrency are well-documented. Historically, Bitcoin tends to hit impressive rallies about 12 to 18 months after each halving. Following the first haliving in November 2012, Bitcoin’s price increased by 9,500% over the next 367 days. Similarly, the 2016 halving resulted in a 3,040% rise over 562 days, and the 2020 event saw an 802% increase over 1,403 days.

Green also warns of short-term volatility as there might be a temporary sell-off as some investors might follow a ‘sell the news’ strategy, taking profits immediately after the halving.

“The Bitcoin halving remains a landmark event in the digital asset space, but the day itself may not live up to the hype in terms of immediate price action. However, its significance in driving long-term value for Bitcoin should not be underestimated,” Green concluded.