LONDON, March 13 (Reuters) - As bitcoin's price reaches

new heights, attention is turning to its upcoming "halving" and

whether it is playing a role in its ascent.

Depending on where you sit, the halving is a vital event

that will burnish bitcoin's value as an increasingly scarce

commodity, or nothing more than a technical change talked up by

speculators to inflate its price.

But what exactly is it, and does it really matter?

WHAT IS IT?

The halving is a change in bitcoin's underlying blockchain

technology, designed to reduce the rate at which new bitcoins

are created.

Bitcoin was designed from its inception by its pseudonymous

creator Satoshi Nakamoto to have a capped supply of 21 million

tokens.

Nakamoto wrote the halving into bitcoin's code and it works

by reducing the rate at which new bitcoin are released into

circulation.

So far, about 19 million tokens have been released.

HOW DOES IT HAPPEN?

Blockchain technology involves creating records of

information - called 'blocks' - which are added to the chain in

a process called 'mining'.

Miners use computing power to solve complex mathematical

puzzles to build the blockchain and earn rewards in the form of

new bitcoin.

At the halving, the amount of bitcoin available as rewards

for miners is cut in half. This makes mining less profitable and

slows the production of new bitcoins.

(For a visual explanation of how blockchain works, click here.)

WHEN WILL IT HAPPEN?

There is no set date, but it is expected to take place in late

April.

The blockchain is designed so that a halving occurs every

time 210,000 blocks are added to the chain. This means it

happens roughly every four years.

WHAT'S IT GOT TO DO WITH BITCOIN'S PRICE?

Some bitcoin enthusiasts say that bitcoin's scarcity gives it

value.

The lower the supply of a commodity, then all other things

being equal the price should rise when people try and buy more.

So reducing supply of bitcoin should lift the price, some

analysts and traders say.

Others dispute the logic, noting that any impact would have

already been factored in to the current price.

The supply of bitcoin to the market is also largely down to

crypto miners but the sector is opaque, with data on inventories

and supplies scarce.

If miners sell their reserves, that could put downward

pressure on prices.

Knowing what is behind a crypto rally is hard, not least as

there is far less transparency about who is buying and why

relative to other markets.

The most common reason given for this year's surge is the

U.S. Securities and Exchange Commission's January approval of

bitcoin ETFs, as well as expectations that central banks will

cut interest rates.

But in the speculative world of crypto trading, explanations

given by analysts for changes in bitcoin's price can snowball

into market narratives that can become self-fulfilling.

WHAT ABOUT PREVIOUS HALVINGS?

There's no evidence to suggest that previous halvings have

caused bitcoin's price to rise.

Still, traders and miners have studied past halvings to try

and gain an edge.

When the last halving happened on May 11, 2020, the price

rose around 12% in the following week.

Later in the year, bitcoin began a sharp rally, but there

were lots of explanations - including loose monetary policy and

stay-at-home retail investors spending spare cash on

cryptocurrencies - for this and no real evidence the halving was

behind it.

An earlier halving occurred in July 2016. Bitcoin rose

around 1.3% in the following week, before plunging a few weeks

later.

In short: it's hard to isolate the impact, if any, halvings

may have had in the past or predict what could happen this time

around.

Regulators have repeatedly warned that bitcoin is a speculative

market, driven by hype and "FOMO" (Fear Of Missing Out), and

poses real harm to investors, even as they simultaneously

approve bitcoin trading products.