A technical change in Bitcoin has brought new attention to the cryptocurrency, but the price bump that came ahead of the adjustment doesn’t seem to have held.
The so-called halving, which took place on Monday, reduced the number of Bitcoins released every 10 minutes to 6.25 from 12.5.
Bitcoin was trading around $8,700 on Tuesday—down about 4% on the day—after rising above $10,000 last week. It’s still up more than 20% for the year, and the talk around halving may have brought new interest from investors. The
Chicago Mercantile Exchange
has reported a surge in volume this year. And The Wall Street Journal reported that
(ticker: JPM) has taken on some companies involved in cryptocurrency—Coinbase and Gemini Trust—as banking clients, although JPMorgan isn’t going to handle cryptocurrency directly.
A JPMorgan spokesman didn’t comment on the clients named in the report, but said “we are supportive of cryptocurrencies as long as they are properly controlled and regulated.”
“The bitcoin halving has come and gone and, as expected, the publicity of the event has given the price a bump,” wrote analyst Craig Erlam at currency broker OANDA. “The question is whether that can be sustained.”
Theoretically, the reduction in supply would make Bitcoin more scarce and thus boost the price. One of Bitcoin’s most important attributes is that there will only be 21 million made. More than 18 million of those Bitcoins have already been created, and a substantial portion of them have already been lost because the codes to access them have been forgotten or misplaced. Bitcoin bulls point out that governments around the world are devaluing their own currencies to spur the economy amid the Covid-19 pandemic, which could eventually lead to inflation.
Still, it isn’t clear why the halving itself would change the price. This event is programmed into Bitcoin’s design so traders could have anticipated it for years.
If anything, the halving confirms that there is a finite supply of Bitcoin, an attribute not shared by fiat money or even gold—whose supply grows slowly every year. Bitcoin, however, can “fork” into new kinds of coins, and there is some debate over whether such forks are similar to supply increases.
Write to Avi Salzman at firstname.lastname@example.org