Bulletin: Bitcoin Halving Analysis

Supply Shock newsletter

• This piece examines Bitcoin price dynamics and inflation patterns around halving events.

This article is sourced from Supply Shock, a newsletter focused on news economy analysis.

The Pattern Behind Bitcoin’s Price Action

The conventional wisdom holds that Bitcoin bull markets often correlate with the cryptocurrency’s scheduled halving events, which halve the reward for mining new blocks and reduce the coin’s issuance rate.

However, naysayers remain skeptical, questioning whether these events are truly catalystic or merely coincidental. Increasingly, though, the notion that Bitcoin’s price exhibits significant, predictable movements around halving dates is gaining acceptance, even among the most cautious analysts.

Since the third halving in May 2020, a specific pattern has emerged during the current cycle (following the April 2024 halving), diverging somewhat from historical precedents.

Examining the price trajectory preceding and following major halving events reveals a complex picture.

The chart below, representing four and a half years (from six months pre-first halving to six months post-third halving), illustrates that while halvings generally occur during bullish phases, the post-halving price evolution differs substantially between cycles.

[Image: Chart 1: Bitcoin price movements around halvings]

The post-2020 halving price reaction has starkly contrasted with the period following the third halving four years prior. This divergence marks a notable departure from the preceding pattern.

What’s iffy, at least for bears and the perma-sidelined, is whether halvings inherently cause major rallies.

Since Supply Shock is literally the name of this (very educational, non-financial-advice) newsletter, it’s clearly not up for debate.

Bitcoin’s fundamental catalyst is its declining issuance rate, codified into its protocol via four-year halving events.

Bitcoin’s inflation rate is periodically cut in half, doubling the cost of production and leading to a series of supply crunches over the next few years as sell-side liquidity dries up, each one reflected in a new all-time high.

The market seems to react each time the issuance schedule is recalibrated.

The chart below plots bitcoin price movements around halvings. The lines start six months prior to each halving and extend until the next one, in total covering around four and a half years.

[Image: Chart 2: Four-year Bitcoin Return Cycles]

Since Supply Shock is literally the name of this (very educational, non-financial-advice) newsletter, it’s clearly not up for debate.

We already know that bitcoin returns have diminished every four-year cycle. The pattern is shown here — bitcoin’s rally topped out at more than 4,200% in the 2016-2020 cycle but “only” managed about 700% between 2020 and 2024.

Market Evolution

The bitcoin market is vastly different in 2025 than it was in 2017. So, it makes much more sense to compare this cycle primarily to the immediate preceding one (April 2020 halving).

Observations around the 2024 halving and recent price action:

• Before each halving, price tends to exhibit a distinct pattern over cycles.
  • Pre-2020 (this cycle): Bitcoin was often declining into the event.
  • Pre-2020 (previous cycle): Bitcoin was typically rising into the event.
• The Halving’s Impact: Immediately post-halving, the historical pattern might not repeat – at least not yet.

Notice that for the six months leading up to each halving – purple in 2020 and pink in 2024 – their respective lines are playing out almost inversely. While the 2020 period saw price pressure building, the equivalent six months in early 2024 saw upward momentum driven partly by novelty around spot ETFs.

This SSH Capital Markets view highlights the significant divergence from the 2020 cycle, influenced by differing market conditions.

This historical price divergence underscores the need to factor in contemporary market structures, evolving trader psychology, and monetary policy environments – all factors starkly different from their 2017 counterpart – when analyzing potential catalysts for price appreciation.