Bitcoin is experiencing a remarkable surge following a tumultuous few months, spurred by Donald Trump’s address at a significant cryptocurrency summit.
During his appearance at the Digital Asset Summit (DAS) in New York on Thursday, bitcoin, the leading cryptocurrency, regained a substantial portion of its recent losses.
After reaching over $100,000 (£77,200) for the first time in December 2024, the price fell to $79,000 (£61,000) due to broader concerns surrounding the economic instability linked to the Trump administration.
However, prior to Trump’s speech, the cryptocurrency had risen back to $86,000 (£66,400).
Speaking remotely from the White House, Trump pledged to turn the US into a bitcoin “superpower” and the “undisputed crypto capital of the world.”
He emphasized his administration’s efforts to ease regulations affecting the crypto sector, notably terminating what he described as “operation chokepoint 2.0,” which prompted federal agencies to discourage banks from engaging with high-risk sectors, especially cryptocurrencies.
Trump argued that this operation overstepped its bounds and constituted a form of “lawfare” against the sector.
Additionally, the president announced the establishment of the US government’s Crypto Federal Reserve, which will retain certain cryptocurrencies acquired by state operations rather than liquidate them.
Despite the downturns of recent months, bitcoin has shown tremendous growth over the years, bouncing back from a low of $16,000 (£12,300) in 2022. Much of the recent appreciation is attributed to the Bitcoin halving event that occurred on April 20, 2024.
This halving is a protocol event triggered by the bitcoin network, created to curb inflation within the cryptocurrency, but it can also lead to significant price spikes.
Halving events occur approximately every four years, and subsequent halvings often result in soaring bitcoin prices for one to two years thereafter.
Aaron Peak, a personal finance expert from the credit reference company CredAbility, remarked: “Bitcoin is inherently volatile: its prices can unpredictably rise or fall, so investors should exercise caution.
“Recently, bitcoin’s price has been on quite the rollercoaster, with some significant fluctuations in just a matter of months.”
What is Bitcoin halving?
Bitcoin halving cuts the mining rewards for the cryptocurrency in half.
Crypto miners utilize sophisticated computer systems to perform calculations and earn bitcoin as rewards; however, after each halving, these rewards diminish.
Miners execute computations necessary to confirm transactions, using their machines to make guesses to crack the puzzle, and the first to succeed adds a new block to the blockchain – a digital ledger that tracks and authenticates transactions across a computer network.
The timing of halvings isn’t set; they occur every 210,000 blocks mined.
Aaron Peak stated: “At present, miners – who authenticate bitcoin transactions – receive 6.25 bitcoins for each new block they contribute to the blockchain.”
“Following the next halving, their reward will decrease to 3.125 bitcoins. This reduction affects the influx of new coins, potentially influencing bitcoin’s market price.”
Why does it matter?
Bitcoin halving serves several crucial roles, restricting supply and curtailing inflation, which is vital for sustaining the cryptocurrency’s value.
Peak elaborates: “Halving is essential as it decelerates the rate at which new bitcoins are produced. Historically, bitcoin halving has prompted price surges. When the influx of new bitcoins diminishes while demand remains constant (or increases), prices tend to rise.
“Think of it like gold; if gold mining suddenly doubled in difficulty overnight while demand stayed the same, the price would likely rise. However, past results do not ensure future performance, so there are no guarantees.”
When is the next Bitcoin halving?
The upcoming bitcoin halving is anticipated to occur in 2028, but the exact timing hinges on how quickly miners can generate new blocks, Peak clarified.
He added: “It will take place once another 210,000 blocks are added to the blockchain, which typically spans around four years.
This is due to bitcoin’s capped supply – only 21 million bitcoins will ever be mined. This mechanism is embedded in bitcoin’s code to manage inflation, akin to how central banks regulate the money supply, but with bitcoin’s rules being immutable.”
Bitcoin halving events are projected to continue until 2040.
