On Monday, bitcoin hit its highest price in more than two years — reaching $719 at its peak — and prices continued to hover near $700 on Tuesday. It’s a marked jump from even last week, though bitcoin prices have been rising since the end of May. By Monday night, the price of bitcoin has jumped more than 21 percent from the start of the weekend.
The spike might be due to an impending event in the world of bitcoin that is about as game-changing as its name — the halving — suggests.
The bitcoin system, unlike typical currency, only exists in a finite supply. So in order to keep bitcoin from being “mined” too quickly by those who discover a block of transactions in exchange for a bitcoin reward, the founder built in a series of events called halvings. Each time another 210,000 blocks are released, the value of the reward will be cut in half. According to Coindesk, that’s slated to happen 64 times before the system will run out of new bitcoins.
But so far, only one halving has occurred since bitcoin launched, causing the bitcoin reward to fall from 50 to 25 four years ago. That halving had little effect on the bitcoin price —but 2012 was a different era for bitcoin, when the average price was only around $13. The next halving is slated to happen in July, when the bitcoin reward is expected to fall to 12.5.
As the date of the halving approaches, it seems like at least part of bitcoin rally can be explained by pre-event jitters. The decreased value of mining should be a jolt to the currencies markets, since the supply of bitcoin will probably drop in response.
Other experts have pointed to global instability as another driver of the spike. According to MarketWatch, nearly 85 percent of the bitcoin transactions during the rally were conduced in yuan —suggesting that concerns among Chinese elite about a destabilizing economy might be pushing some to invest more intensely in the currency.
Meanwhile, in Europe, the possibility of a Brexit is fueling uncertainty in the global markets that could be spilling over into bitcoin trading.