Halving boosts the Bitcoin price by 2.3 times — and my $1 million target

Mined bitcoins aren’t necessarily spent

As I write, the total number of Bitcoins mined is 17,682,485, but this overstates the quantity in the network by 1,632,048 coins or 10.1%. There is a widespread assumption that the coins mined immediately join the network, but they don’t have to. They only enter the network once the miner has “spent” them; which more often than not, means they have been sold — or at least distributed into the pools, and then sold.

Source ByteTree.com

Buyers and sellers are matched

In a free market, supply must equal demand, with the only variable being price. Too much Bitcoin coming to market? The price must fall until buyers are enticed. A surge of interest from new buyers? The price must rise until holders are tempted to sell. It is important to remind ourselves of this, because it doesn’t matter how strong or weak the market is, whatever the miners sell must be bought by investors.


Economists look at velocity to see how fast money moves around an economy. It is calculated by comparing GDP (economic activity) by the amount of money in circulation. In the US, it has been falling for years, but since mid 2017, has started to rise. That is because the US economy is now growing faster than the money supply; an environment that normally sees inflation rise.

Source Bloomberg US Velocity of money GDP / M2 Money supply since 1990
Source ByteTree.com
Source ByteTree.com
  1. It is mean reverting with a long-term average around 770%.
  2. You would generally associate high readings with hype and low readings with despair.
  3. Large gains can generally be associated with rising velocity.
  4. Large losses (2014, 2018) were associated with falling velocity.
  5. As previously mentioned, Bitcoin halving occurred in late 2012 and mid 2016. Both of these led to periods of high velocity.
  6. The next halving is expected to occur in May 2020. Prepare for a surge in velocity.
  7. I have back-tested velocity. By avoiding falling velocity, that reduces risk, but it also misses some gains. This is similar to growth stocks, that can surge even as the economy is slowing.
  8. I think velocity should be seen as a gauge of health and hype, a bit like the PMIs in the stockmarket.

Halving is a process

The next chart shows you that while halving is an event, its impact is more of a process. The selling pressure doesn’t drop off a cliff, but it rolls downhill over time; albeit with sharper declines during halving periods. The network now sees around 1% of supply sold each quarter.

Source ByteTree.com

Halving boosts the intrinsic value by 2.3x

While velocity appears to mean revert around a constant, the next chart says it all. Here I have taken the weekly average velocity (past 12 weeks) and divided it by the change in supply over the same period.

Source: ByteTree.com
  1. This chart is ascending as velocity revolves around a constant and supply is forever falling.
  2. Although the early days had questionable data, there are levels between the between halving periods.
  3. The average reading until the first halving in late 2012 was 211.0%. The next period until mid 2016 saw an average of 535.1%. The average since is 1261.1%.
  4. These increases between halving periods was 2.4 times and 2.3 times respectively.


It’s hardly rocket science to say that halving the supply will see the price of goods double. But by looking at actual data, and the unbiased results, it turns out to be a little better than that. The next halving process ought to boost the price of Bitcoin by around 2.3 times.



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Applied data for digital asset investors. ByteTree provides real-time data, fundamentals, technical and deep blockchain market analysis for Bitcoin, and more.