Is the next “Bitcoin halving” already reflected in prices?


The halving is probably the most anticipated event when it comes to Bitcoin and cryptoassets in general.

Historical background

As the name suggests, block creation, i.e. the reward miners receive for validating transactions and securing the blockchain, will be halved.

In other words, the rate of creation of new bitcoins will decrease by 50%.

Halving is an essential feature of the Bitcoin protocol that not only ensures a disinflationary schedule of supply growth, but also that the supply converges to a maximum of 21 million coins.

Since the launch of bitcoin, we have already experienced three “halvings”, respectively in 2012, 2016 and 2020. Each time, the creation of blocks was halved, initially going from 50 BTC to 25 BTC, then to 25 BTC to 12.5 BTC, and finally from 12.5 BTC to 6.125 BTC today.

At the time of writing, we expect the halving to occur around April 20, 2024 at approximately 19:20 GMT, assuming an average block creation time of 10 minutes. From then on, block creation will increase from 6.25 BTC to 3.125 BTC, decreasing the daily balance from around 900 BTC to around 450 BTC.

2024.03.22.Bitcoin halving

Assuming a constant flow of demand, prices will have to adjust upwards to adapt to the fall in the flow of supply.

Historically, previous halvings have all been followed by a very significant increase in the price of bitcoin in the months following the event. On average, performance increased by approximately 17x (+1800%) 500 days after the halving.

2024.03.22.Halving performance

Is the halving already reflected in the price?

Traditional investors are generally confused by the significant performance recorded in the past after the halving and tend to think that this next halving is already priced in.

Indeed, the dominant hypothesis of an efficient market assumes that all public information is immediately reflected in the price. Since the date of the halving and its effect are publicly known, logic would dictate that this event and subsequent events related to the halving should be reflected in the price in advance.

We attempted to analyze this hypothesis with the following argument:

If the halving is not significant, then there should be no substantial difference in performance X days after the halving date compared to X days before the halving date.

The diagrams below show first (top) the difference in performance between the same number of days before and after the halving, then (bottom) the T value of each of these performance differences.

2024.03.22.Halving history

Here are some key observations from our analysis:

– There is no significant difference in performance until approximately 100 days after halving.

– After 100 days, statistically, the differences in performance become more and more significant.

– The effect of “halving” tends to be greatest 400 days after its occurrence.

The results suggest that the difference in performance after 100 days is so large that it is unlikely to be due to chance or pure coincidence.

These observations are also consistent with the fundamental on-chain mechanisms that occur around halving.

By admitting an increase in prices resulting from anticipation of the “halving”, Bitcoin miners would immediately take advantage of this to sell their daily stock, which would have the effect of limiting this increase. Following the halving, miners have less stock available, which explains why the price finds a higher equilibrium.

In fact, we tend to see an increase in sales by miners whenever prices are above their average marginal cost of production. However, this level of sales cannot be maintained after the halving.

We therefore expect prices to converge towards a higher equilibrium price in 2024 thanks to the positive effects of halving and because of the constantly increasing scarcity factor. More specifically, our model suggests that this equilibrium price could pass 103,000 USD at the end of 2024, 172,000 USD at the end of 2025 and finally 215,000 USD at the end of 2028.

2024.03.22.Bitcoin forecast

Our model assumes that the halving effect will only be reflected gradually over time. It also takes into account that the effect of each halving is bound to diminish marginally over time, unlike the stock-flow model which assumes that the effect increases exponentially with each halving. Our aforementioned estimates are therefore rather conservative.

Related Posts

$9.5 billion options expire this Friday

8:29 a.m. ▪ 3 min reading ▪ by Fenelon L. This Friday, crypto derivatives exchange Deribit is preparing to experience one of the largest Bitcoin options expirations…

Towards a bitcoin supply crisis?

2:00 p.m. ▪ 4 min reading ▪ by Luc Jose A. While the wind of the resumption of its upward momentum is still making people happy, there…

A drop below $50,000 before the Bull Run?

Wed 27 Mar 2024 ▪ 3 min reading ▪ by Eddy S. Bitcoin, the cornerstone of the cryptocurrency market, is facing unprecedented turmoil in 2024. CryptoQuant CEO's…

the halving is less than a month away, what will change?

It is the most attended event in the crypto ecosystem. The Bitcoin (BTC) halving is fast approaching, and it is generating its share of hope and transformations….

woman arrested in possession of 2 billion pounds (GBP) of cryptocurrencies

It is the largest cryptocurrency seizure in UK history. A woman has just been found guilty of setting up a vast money laundering enterprise, which used several…

ETNs are coming soon to the London Stock Exchange

The London Stock Exchange (LSE) announced on Monday the upcoming arrival of Exchange Traded Notes (ETN) Bitcoin (BTC) and Ethereum (ETH) on its Exchange. What are the…

Leave a Reply

Your email address will not be published. Required fields are marked *