What happened
Shares of Grayscale Bitcoin Trust (GBTC 1.70%) jumped 14% on Wednesday, as the price of bitcoin climbed back above $8,500.
So what
Bitcoin's price appears to be rallying ahead of "the halvening." The halvening will cut the popular cryptocurrency's mining rewards in half, in a process designed to slow the rate of new bitcoin creation until its maximum supply is reached. (Only approximately 21 million bitcoins will ever be created.) The halvening should help to highlight bitcoin's attractive supply dynamics -- at a time when governments around the world are printing their fiat currencies at an unprecedented rate.
The halvening is expected to take place on May 12.
The Grayscale Bitcoin Trust has delivered strong gains to cryptocurrency investors in recent days. Image source: Getty Images.
Now what
By halving the new supply of bitcoins, the halvening also essentially doubles the cost to produce the cryptocurrency. This helped to drive the price of bitcoin sharply higher after prior halvenings in 2012 and 2016, and it's possible that a similar situation could play out again in the coming months. If it does, the Grayscale Bitcoin Trust could see its share price continue to trend higher.
