Market cycles and the halving

Wonder

1. Past price peaks have followed halvings: cause, or coincidence?
2. What happens to miner revenue when the subsidy halves but fees remain low?
3. How can a model fit historical data perfectly yet fail on new observations?

Explore

1. Bitcoin’s monetary policy is hard-coded. The block subsidy started at 50 BTC and halves every 210,000 blocks, roughly four years. This schedule reduced the reward to 25 BTC in November 2012, 12.5 in July 2016, 6.25 in May 2020, and 3.125 BTC in April 2024. The protocol executes this reduction automatically; no committee votes on it. Each halving cuts the daily issuance of new coins by fifty percent, creating a scheduled scarcity event that distinguishes Bitcoin from fiat currencies where supply is managed discretionarily.
2. Historical market data shows large rallies following these halvings, with peaks arriving approximately twelve to eighteen months later. Late 2013 saw a surge after the 2012 halving; December 2017 followed the 2016 event; November 2021 capped the cycle begun in 2020. Each peak was followed by drawdowns of roughly seventy-five to eighty-five percent. Explanations vary: reduced new supply creates tension if demand holds, attention cycles drive speculative entry, and leverage amplifies moves. The 2020-2021 rally also coincided with massive global monetary stimulus, complicating attribution.
3. The stock-to-flow model, popularized in 2019 by PlanB’s paper ‘Modeling Bitcoin Value with Scarcity,’ predicted price based on the ratio of existing supply to new annual production. It fit historical data points remarkably well, leading many to treat it as a forecasting tool. Forecasts built on it, including PlanB’s own later charts pointing to about $100,000 by the end of 2021, did not materialize. The model assumed scarcity was the primary driver of value, ignoring broader macroeconomic factors, regulatory shifts, and market structure changes. This failure highlights the danger of extrapolating from small samples; three or four cycles provide insufficient data to establish causality.
4. The 2024 cycle bent the pattern without clearly breaking it. A new record high came in March 2024, before the April halving, helped by heavy buying through the new US spot ETFs. Prices then went on to set further records in 2025, peaking in October 2025 about 18 months after the halving, roughly where the old pattern would have put it. Whether the halving still drives cycles, or simply coincides with other forces, remains disputed.
5. Cycles are also shaped by forces outside bitcoin’s code: interest rates and the money supply, leverage in derivatives markets, and the failure of large intermediaries, such as Mt. Gox in 2014 and FTX in 2022, which turned declines into collapses. Any single-cause story about the halving leaves most of this out, and nothing in past cycles guarantees future ones.
6. Open a block explorer and locate blocks 210,000, 420,000, 630,000, and 840,000. Check that the subsidy in each block’s coinbase (the coinbase total minus that block’s fees) reflects the halved amount: 25 BTC, 12.5 BTC, 6.25 BTC, and 3.125 BTC respectively. Note the timestamps to confirm the approximate four-year intervals. This direct inspection of chain data confirms the mechanical nature of the schedule, independent of market price or external events.

Key facts

Exercise nine, six, three, one

Fact check

Dates, figures and claims checked against the published sources listed below.

• PlanB, 'Modeling Bitcoin Value with Scarcity' (2019)
• Bitcoin Protocol Specification: Block Subsidy Halving Schedule
• Public market price histories from major exchanges (2013-2024)