Effects of Bitcoin halvings on the price

That said, historical data show a surge in price of bitcoin after the halvings. There are a few good reasons to assume that the price will go up after the future halving events:

• Supply goes down

  Bitcoin miners are an essential part of the network. For their operations, they need hardware and electricity, for which they pay by selling the bitcoin they mine.
  As the name implies, the halving cuts in half the supply of new bitcoin going forward. At the time of writing(just before the 2024 halving) for each block mined the block reward is 6.25 btc, whereas after the halving it will be 3.125 btc per block mined. On average, a Bitcoin block is mined every 10 minutes - so about 144 each day. At 3.125 btc/block, that means that each day, each day 450 bitcoin fewer will be mined and sold. Assuming no changes to the demand for bitcoin, everyone who would have bought those 450 bitcoins before, will now with their purchasing power be competing for the remaining 450 bitcoins that will be mined, pushing the price upward in the process.

• Demand goes up

  Now that the halving effect has been widely recognised, there will inevitably be people who will, before the halving even happens, start to buy and hold bitcoin waiting for the price to rise. This is additional removal of supply from the market that pushes the price upward even more. As the increase in price becomes news in the media, it creates an additional spike in the price and causes it to become very volatile as inexperienced buyers crowd in and more experienced speculators start to sell as they predict the price to eventually return to more sustainable levels.

• Global liquidity cycle

  The Bitcoin cycle appears to coincide with the election cycle in the US. Whether it's been deliberately designed so we don't know, but we do know that pre-election tends to be the period when politicians try to keep the public happy - including increasing availability of money - and some of that money sloshing around inevitably flows into Bitcoin, raising demand and so the price.

FAQ: If the halving is an event known in advance, isn't it already priced in at the time of a halving?
Answer: It is partly priced in. In the cycles so far, the 17 months prior to a halving have seen significant increases in price. There are, however, reasons why it is not fully priced in:

• It's the pre-halving increases and the halving that entice more retail buyers that cause the blow-off top;
• Even though we know a halving is coming, we don't know the exact path the price will take. Different market participants will make different decisions based on their situation and their estimates of price movements;
• The information comes in gradually. Not all buyers have all the information: some don't understand the halving or are not convinced of its effect until they learn more or have followed a Bitcoin cycle play out. They are often late to the game and tend to buy near or at the top, or sell when the price drops. Some of them may not return for a cycle or two because they feel disappointed or fooled. For them, it will take time to return. The incremental increases in information held by different participants causes incremental increases in price, rather than one big jump we'd get if everyone had full information and conviction at the same time.