.You can also find out more about the following: Bitcoin The “halfing” of the world’s population is fast approaching.
Every four years, this event is recorded in the code of bitcoin. It is the halving of bitcoin miner rewards. It reduces the rate at which bitcoins are added to the market.
The halving of bitcoins will only ever create further scarcity since there are 21 million Bitcoins.
Halfing bitcoins has in the past been accompanied by massive increases of prices. This time things are different.
Bitcoin is already at a record-breaking high before the halfing has even taken place. The approval of bitcoin spot exchange-traded funds has sparked the market, and a lot of interest in the cryptocurrency.
The latest episode of CNBC Tech is now available. Beyond the Valley Tom Chitty, who you can hear in the podcast above, and I talk about what the Bitcoin halving actually is. We also discuss how the latest cycle of bitcoin is different than the previous ones.
Please email us if you have any comments or questions about this episode, or other episodes. beyondthevalley@cnbc.com.
Click on the link below for your preferred platform to subscribe to Beyond the Valley:
This is the transcript for the April 11, 2024 episode of Beyond the Valley. 11, 2024. The text has been edited to make it clearer.
Tom Chitty
Not some ancient ritual, but the halving is coming soon. Every four years, the mining rewards are cut by half. This should increase the demand and reduce the supply of bitcoin. Arjun was at Paris Blockchain Week – Europe’s largest blockchain and digital asset event – to learn why the halving of rewards is important. He also learned what this will mean for bitcoin prices and how the current halving cycle might be different. We’ll get all the news on Binance and its future. Finally, we’ll find out if Ethereum will be the next crypto after bitcoin that gets an ETF. How was Paris for you?
Arjun Kharpal
Paris is a beautiful city. While I was in Paris, I had a delicious Parisian beer.
Tom Chitty
You’re going to start off with food or drinks, I knew that.
Arjun Kharpal
We sort of got on Eurostar. Eurostar is my favorite. It’s a great little journey. You know, I don’t think there is any sort of airport situation.
Tom Chitty
If you want to email us then the email address is beyondthevalley@cnbc.com. We will also read out your comments on air. We’ll read Arjun’s Stat of the Week before discussing our story.
Arjun Kharpal
What is 13777?
Tom Chitty
13,777B. Okay, now, if you’d like to keep up to date on the world of tech, then the best place to start is the Beyond the Valley weekly newsletter packed with the best international tech stories from CNBC, you can subscribe by heading to CNBC.com/beyond-the-valley, click on the subscribe button, and it will drop in your inbox every Friday. For those who have never heard about it, let’s get back to the main story. The bitcoin halving Arjun. What exactly is Bitcoin?
Arjun Kharpal
Halfing or halvening is what others refer to.
Tom Chitty
It’s just so strange. What if Halvening sounded even more medieval than it already does?
Arjun Kharpal
It’s not clear to me. I go by halving. The pronunciation is easy. There will never be more than 21,000,000 bitcoins. Bitcoin’s creation is based on a public record of all transactions. Transactions must be verified in order for them to go through. This validation is carried out by miners. It could even be me or you, although it’s unlikely. When they validate a bitcoin transaction they compete with other miners. The bitcoin code has a halving every four years, where the rewards that miners receive are cut in half. It is then thought that the amount of bitcoins created will be cut in half. It slows the flow of bitcoin into the market. This keeps inflation at bay in the Bitcoin space. That’s what it’s all about.
Tom Chitty
If I want to buy Bitcoin, I’ll buy fresh bitcoins that have been mined. Not someone selling bitcoins, is this right?
Arjun Kharpal
If you purchase bitcoin or if we buy it on an exchange, then we are likely to be selling bitcoins that already exist. This bitcoin could have been created when miners received it and sold it later. It is then entered in the buy-and-sell market. That’s what bitcoin is.
Tom Chitty
What makes it important? Has it led to historically high price increases?
Arjun Kharpal
It’s also important, because a lot people who are fans of bitcoin on a purely technological level love the concept. People who support bitcoin often say that currencies such as the U.S. Dollar or other currencies can be printed ad-infinitum. You know, the central banks control the supply and they know, can effectively print more money. Quantitative easing, for example, is a way to do this. It devalues either the dollar or the currency. So they claim that bitcoin won’t be devalued with the half-off. The supply is finite and limited. No central bank can change that. Bitcoin is not controlled by a central authority. So, from both an ideological and a technical point of view. This is what bitcoin fans like. From a price and market perspective, it’s another story. When people discuss bitcoin, they often refer to the Bitcoin cycle. This four-year cycle is what happens. Often, the bull market that has started starts just before the halves. After halving bitcoin a few month later, it reaches a new high. This is what happens in a typical cycle. The idea goes that if bitcoin’s supply is getting smaller, then it will become rarer. Just like gold or precious metals or anything else, the price of Bitcoin would rise. That’s what the thinking is.
Tom Chitty
Yes, I talked to a crypto enthusiast. He said that is what makes Bitcoin special. Everything else, he explained, follows a similar techniqe. It’s also the limited supply and the constant devaluation of our currency through inflation, through the printing money. There’s no way that more bitcoins will be created. At least, that’s the impression they have.
Arjun Kharpal
From a technical and philosophical point of view. It’s what many enthusiasts and supporters love.
Tom Chitty
We’ll talk about why the cycle this time is different. This has to do with ETF, which happened just a few short months ago.
Arjun Kharpal
Yeah, that’s right. Bitcoin reached a record high, and a brand new high level before the halving. This was largely because, as we’ve discussed in an earlier episode, spot ETF approvals were granted in the U.S. which increased access for investors to bitcoin. It also means the ETF issuers will need to purchase bitcoin in order to support the ETF. There’s a lot of interest and money flowing into ETFs, and those who issue them will have to buy bitcoin to back up the fund. This has really boosted the price of bitcoin and the excitement surrounding it. This is why the price reached an all-time high. You’ve now got the halfing in the mix. How will this affect the market? You said I attended the Paris Blockchain Week. Richard Tang, the Binance CEO was there and I got to have a rare interview. In the Binance office, I asked Richard Tang a few questions about how this current market cycle is different.
Richard Teng
If you had asked me last summer, then I would have said that bitcoin was priced at a specific level. It exceeded my expectations, and that was early. This cycle has a different feel to it than previous cycles. You’ve been in the crypto world for a while, so I assume you are aware that crypto has a four-year cycle. The price movement cycle coincides with bitcoin’s halving in 9 days. It’s normal to see new highs in prices about 6 months after the halving, but not this time. This is because the ETF was introduced. What are you doing to bring in so many users and new liquidity?
Arjun Kharpal
Richard Teng is saying something very similar, that the ETFs have pushed demand forward. He is very optimistic because not only do you have that but you also get the ETFs, which could push prices even higher. He initially thought that bitcoin could reach $80,000 in this year. He says, “I’m probably going to go beyond that now.”
Tom Chitty
He’s even more confident now.
Arjun Kharpal
You’re right. Not only do you have the ETF, but you also get a halving. This is going to be an interesting ride. This is a new cycle. Is this demand being pushed forward by the ETF alone? Will it be ETF plus traditional impact? It remains to be determined.
Tom Chitty
While you were in Paris you spoke to many crypto enthusiasts. What were some of the most outlandish predictions for price? Anyone who was bearish? Did anyone say, “I expect the price to fall?”
Arjun Kharpal
Tom, this was just a celebration. According to crypto-community, it is going up. It’s quite difficult. Isn’t this a highly divisive class of assets? Crypto. There are people that love or hate it. There’s really nothing negative to say. There’s no one in the middle.
Tom Chitty
You and me.
Arjun Kharpal
Tesla Stock is the closest thing I can compare it to. People either love Tesla, think there’s nothing wrong with it and that it’s the future or they just see it as another auto company. Fascinating. That’s probably what creates a market. No, this year I heard outrageous price predictions of $100,000 or $150,000. These are the highest levels predicted for 2018.
Tom Chitty
You can be more tempered when you speak to crypto enthusiasts. Ask them questions, but don’t challenge their claims that this technology is the greatest thing since sliced toast. How do they react? What’s the reaction?
Arjun Kharpal
The front is definitely in the game. They’re definitely up to the challenge. They’re on top of it. They want to speak up. They see many pros and want to discuss it.
Tom Chitty
They’ve spent probably years hearing that, well, they are crazy, and that what they invest in is useless. Okay. Let’s take a look at Binance. In the last 12 months, Binance has been in the media a lot. Tell us why you think this is a pretty special interview. Tell us about Binance.
Arjun Kharpal
Binance is the largest cryptocurrency exchange in the world. The exchange has a large number of users and assets. Last year it was involved in a legal case with the Department of Justice of the United States. It was the result of this that Binance’s former CEO Changpeng Zhao – CZ – we have spoken before about Binance on an episode. The DOJ brought criminal charges against him. Binance agreed to pay $4.3 billion as a settlement. The DOJ made a lot of allegations, including that there were not enough controls in place to prevent money laundering and knowing who your customers are. So long list. Richard Teng is the newly appointed CEO, who has been in the position for only a few months. He was previously a regulator in Abu Dhabi. It’s now his job to fix this mess. We spoke about his plans for 20-25 minutes. One of the most important things that the DOJ brought up with Binance, was the culture. CZ, Binance’s former CEO, had a culture in which it was more acceptable to ask forgiveness than permission. Richard Teng was the first person I asked about it.
Richard Teng
In those early stages, the rules were still nascent. There was no clarity. Binance operated in a particular way. We have now moved on, and as we mature, our focus is more sustainability. The direction we want to go is clearer, which is towards a much stronger compliance program.
Arjun Kharpal
His argument was that the DOJ’s allegations were based on past behaviors, such as a culture of growth and startup in the early years. Now, the company has matured, is working with regulators and still needs to grow. One of his greatest challenges will be to deal with the fact that Binance still has a large number of old-guarders. How do they respond to the change? Is he going to get them? This can also be a very big question.
Tom Chitty
It’s fascinating that startups, by nature, need to be on the cutting edge, yet can get caught up when it comes down to best practices and behavior.
Arjun Kharpal
Many in the crypto-industry will say, “Well, we haven’t got the regulations in place.” We don’t know exactly what we are allowed to do.
Tom Chitty
They have?
Arjun Kharpal
This is the other side of the argument.
Tom Chitty
Do they sound confident about this?
Arjun Kharpal
The crypto industry in the U.S. is fed up of the U.S. because there are no regulations. They’re so anti-crypto, and always say that the U.S. has fallen behind. That’s what I heard from people on the ground. The U.S. was so far behind. Other jurisdictions have already taken the lead in establishing an environment where some of these companies, whether they are crypto, Web3, blockchain or whatever, can thrive.
Tom Chitty
We’ll talk about them a bit. After the Bitcoin ETF was announced, there were a lot of excitement and fanfare. If you don’t understand what an exchange traded funds is, we mentioned this earlier. Also, there was talk of which cryptocurrency would be the next to get an exchange traded fund. Ethereum has been discussed as the potential next cryptocurrency. Was there any news about this in Paris?
Arjun Kharpal
Ether is one of the biggest crypto currencies in the world. It’s the token associated with Ethereum. One day we’ll talk more about blockchains, I believe. Imagine Ethereum as a platform on which you could build applications, almost like an operating-system. These apps could be built using tokens such as ether. There’s lots of buzz around Ethereum and its technology, as well as ether. If you could give more people the opportunity to invest in ether through an ETF, that would be a big deal. You know, at Paris Blockhain Week, I spoke to some issuers who have bitcoin ETFs about whether they think the SEC would approve an ether-based ETF. If anyone wants to find out, it is them. They must work with regulators. VanEck, one of the companies that issue the bitcoin ETFs, is headed by Jan van Eck. Jean-Marie Mognetti is the CEO of Coinshares. Coinshares, via an acquisition in the U.S., issues another Bitcoin ETF in the U.S. Jan van Eck and his VanEck company have also submitted an application for an Ethereum ETF. Then I asked both, starting with Jan van Eck: What are the odds that the SEC will approve an ether-based ETF by the deadline in May?
Jan Van Eck
Ark and Cathy Wood are probably the first to be dismissed for May.
Arjun Kharpal
You don’t expect the SEC approve them?
Jan Van Eck
No, no. The way that the legal system works, regulators give comments to your application. This was the case for many weeks, even before Bitcoin ETFs. Ethereum has been a hot topic in recent weeks.
Jean-Marie Mognetti
Our view on this is similar to that of Jan. The SEC has put up a clear sign that says, “What is proof of work? What is proof stake?” I do not see any approvals before this year.
Arjun Kharpal
They both basically said no chance. Jan van Eck’s comment was very interesting. He said that we usually have many meetings with SEC about these ETFs. He said that it was just a few pin-drops, nothing is happening at this time. They are confident it won’t happen. The SEC is supposed to approve or reject some ETFs by the May deadline, which falls towards the end May. The market was excited by this, so the SEC poured cold water over it. According to the SEC, ether is problematic because there is an ongoing debate about whether it is considered a financial instrument or not. This brings ether and certain cryptos into some regulatory jurisdictions. Ether is not yet determined by the SEC. It’s still in flux. That’s a big problem. Gary Gensler is the SEC chair and he said that just because bitcoin ETF was allowed, it doesn’t necessarily mean we will do the same with ether. There are a number of obstacles, and I believe the industry is also aware that there will be many.
Tom Chitty
What else can you tell us about the Paris Blockchain Week?
Arjun Kharpal
The day before Paris Blockchain Week, I attended an AI Summit in Paris.
Tom Chitty
What if this event is not connected to the one you’re referring to?
Arjun Kharpal
The same people. It was interesting. SambaNova was the company I met. It’s like a Nvidia rival. This was interesting to me. Yes, I do think that a great deal of discussion around the blockchain is about, well, the price halving and the market. But a number of people are also excited by some possible applications of some blockchains. Over the next two years, people will say that bull markets can be a great time to invest in the blockchain industry. They bring money, new technologies, and other things. Let’s see how this year goes.
Tom Chitty
As you said, it sounds as though an episode about blockchain is worthwhile.
Arjun Kharpal
This episode, with the imminent halving, should give some insight.
Tom Chitty
We’re looking at dates like the 18th or even 20th.
Arjun Kharpal
When you are sure that the block has been mined efficiently, it will determine when the halves happens. It’s coming soon. You know, I’m sure that whoever is listening to me right now may be hearing the halves happening or having happened. At least, I hope that it gave a little context to what’s going on.
Tom Chitty
Fantastic. Okay. We’ll leave it there. Before we end the episode we’ll do the stat of the Week.
Arjun Kharpal
13,777. You were wrong about something last week.
Tom Chitty
Be honest. The answer or, at the very least, the question seemed a bit random. There are a lot of crypto currencies in the world.
Arjun Kharpal
You did it!
Tom Chitty
Did I get it?
Arjun Kharpal
Yeah. You got it.
Tom Chitty
No way!
Arjun Kharpal
You’re right. Are you googling?
Tom Chitty
It was not a joke. I read the entire script and thought about it.
Arjun Kharpal
Existence of 13,777 crypto-currencies. What is this?
Tom Chitty
It is. We only talked about a few of them.
Arjun Kharpal
You can find coins with themes based on cats, dogs and other animals. You’ll find the usual coins, like Bitcoin. There’s stablecoins. There are also a lot of meme coins, which you may have mentioned before.
Tom Chitty
Memecoins.
Arjun Kharpal
Did you say memecoins? You said memecoins? I thought you said memecoins. Yeah, memecoins.
Tom Chitty
What exactly are they?
Arjun Kharpal
These coins are a joke.
Tom Chitty
What do people invest their money in?
Arjun Kharpal
They invest in these things. Sometimes you will see a meme go up by 200% or more in one day. It is a thing.
Tom Chitty
You know about price increases. I saw Dumb Money. You’ve seen it?
Arjun Kharpal
No. Yes. Yeah. You’re on the list.
Tom Chitty
Yeah. Many of our CNBC co-workers in the U.S. will be there. The Gamestop squeeze is the topic.
Arjun Kharpal
They were called meme stocks. The meme stocks. You know what? I’m sure we have memecoins.
Tom Chitty
You should have a section on tech. Gaming.
Arjun Kharpal
Tech, gaming-related literature, films, culture.
Tom Chitty
Yeah. Culture.
Arjun Kharpal
Culture in general
Tom Chitty
Very good. Highly recommended. This is a very good show. Remember, you can email us at beyondthevalley@cnbc.com. We had a great story last week, the one you told us about your flight to hell. David Hunt wrote an email in response to the story. David said that we had a storm somewhere in Pennsylvania after leaving Chicago. dark dark skies. Hard rain, lightning. Cracks can be heard. The plane’s lightning is visible. The passengers are silent. A boy, maybe five years old, giggles in delight as we all hold our breath. On my way from NYC to Elmira in New York, we experience freezing rain. We de-ice several times on the tarmac before taking off. As we were flying into a storm, our flight was rerouted via Syracuse. Snow is so heavy that I am preparing for the overnight announcement. A small group is directed into a van to drive 90 miles to Elmira in whiteout conditions. We arrive in Elmira at 2 am, a couple hours after we left. It’s still whiteout. It’s been three days since I parked my van. Now, it is snowing and I drive home after 3 am.
Arjun Kharpal
This is a true flight to hell.
Tom Chitty
Poor David. Thank you for the kind words. You know, I’m sure his flight was longer, more difficult and a little scarier. It was painful for you.
Arjun Kharpal
Just really painful. We won’t go back to the days when Paris was a great city.
Tom Chitty
Eurostar is another way to travel if you are in doubt. This is the end of this episode. Please subscribe and follow the show before we leave. Thank you, Arjun.
Arjun Kharpal
Tom, thank you for your kind words
Tom Chitty
Next week, we’ll return with another episode of Beyond the Valley. Goodbye.