By Tom Wilson
LONDON (Reuters) – If you’re not a bitcoin enthusiast, you probably haven’t heard what’s happening next year: It’s called the “halving”, and it will cut production of the cryptocurrency by 50%.
No one’s in control of this process. It’s a rule written into bitcoin’s underlying code by its pseudonymous creator Satoshi Nakamoto more than a decade ago.
The event, expected in May 2020, slashes by half the number of new coins awarded to bitcoin miners who provide global supply of the cryptocurrency by solving complex maths puzzles.
That’s a big change in a market worth about $120 billion where bitcoin worth several billions dollars are created every year.
Players in the know are preparing for the sharp price gains and volatility that have accompanied previous halvings, which happen roughly every four years and act to both ensure the scarcity of bitcoin and keep a cap on price inflation.
There are likely to be winners and losers. So market participants, from bitcoin miners and traders, are trying to fathom how the next halving might play out to gain an edge.
“This is the biggest question right now for most of the industry,” said Eyal Avramovich, chief executive of MineBest, a Warsaw-based company that mines bitcoin.
The fracture to the production of bitcoin provides a reminder of one reason why the decentralized digital currency has confounded regulation and acceptance by mainstream finance: Its fate remains tied to arcane technological factors.
In theory, if supply is cut and demand stays constant, prices rise. This time around, seven crypto traders and miners interviewed by Reuters said the May halving would probably lead to greater volatility and trading volumes. However the cut to supply is liked to be more priced in than previously, they…