Is the Halving priced in?27 Dec 2023 16:26
The scarcity of bitcoin, and the constant demand, are often used to justify the rising prices that have occurred after each and every previous halving event.
Bitcoin and the Efficient Market Hypothesis
But not every investor agrees, particularly those who believe in the “efficient market hypothesis” which states that the price of an asset reflects all existing available information.
These investors argue that as the halving is a public and predictable event, then the impact of all future halvings must already be reflected in the current price of bitcoin — and therefore the events would not have any meaningful impact on the price.
Unpredictable factors Impacting Bitcoin price
However, even though the halving itself may be perfectly predictable, there are other factors at play that are more difficult to foresee.
These include the increased press coverage of cryptoassets and bitcoin that we often see around halving events, along with renewed interest in the potential of blockchain technology, and growing utility with more emerging real-world use cases for the asset — all of which can impact the price of bitcoin.
Not only that, but bitcoin is also influenced by the ever changing macroeconomic environment, which can influence miners to make different strategic decisions about buying and selling.
Mine baby, mine...
The upcoming Bitcoin halving marks a pivotal moment for Bitcoin from a scarcity standpoint, as its stock to flow ratio will surpass that of gold.
Looking at other fundamental metrics to gauge the health of the Bitcoin network, we can see that Bitcoin’s hash rate has just set another all-time high, indicating increasing demand to mine the leading digital asset as well as more efficient mining rigs being plugged in.
Halving: What to expect
All of these factors can play a role in determining how the market reacts to the halving. Yet one thing is certain: regardless of what else is going on, this simple reduction of supply fundamentally shifts the market in favor of higher prices.
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