Noelle Acheson is a veteran of company analysis and CoinDesk’s Director of Research. The opinions expressed in this article are the author’s own.
The following article originally appeared in Institutional Crypto by CoinDesk, a weekly newsletter focused on institutional investment in crypto assets. Sign up for free here. To find out more about crypto valuation metrics, download our free report here.
Whether you call it the “halving” or the “halvening,” one of the few things we can be sure of in crypto is that the conversation around bitcoin’s upcoming reduction in mining reward will intensify over the next six months.
Why? Because previous halvings have triggered bull runs. And who doesn’t like a bull run?
Many are convinced that the next halving will have the same market effect, and it’s not just a belief that history repeats itself – models have emerged to support this theory.
But if the bull run is expected, why hasn’t it already happened? Why isn’t the halving already priced in?
Because the halving is much more than an event – it is also a narrative, and an uncertain one at that.
What and why
First, a review of what the halving is and why it happens.
To keep inflation under control, the bitcoin protocol was programmed with a hard limit of 21 million, with new bitcoins entering the system as an incentive for network processors (“miners”) in a gradual and controlled rhythm. The rate at which they are created is reduced by half every four years, ostensibly to mimic the increased difficulty of gold mining.