Why The Next Halvening Will Have A Huge Impact on the Market

First, I think everyone understands that mining is very competitive with narrow margins. Miners end up spending a tremendous amount of money every month to pay for overhead(mostly ASICs +energy). Some large companies also need to pay employee salaries.

So, currently Bitcoin has a valuation of ~$20k USD of BTC a day, ~144 blocks are mined everyday (one every 10 minutes), and 6.25 BTC in block rewards. This equals 900 new BTC, or ~$18,000,000 USD are mined every day. Averaged out over the year, this means that 900 BTC is sold in the market everyday by miners. Thought about another way, 900 BTC must purchased everyday at ~$20K per coin to keep the price stable, meaning an inflow of $18m. Thought about a third way, if the BTC price stays flat, $18m is added to the market cap every day.

In 2024, block rewards are halved and the number mined every day drops to 450 BTC. Now, if we assume demand stays the same, the available supply drops dramatically. Think about in the context of yearly inflation of Bitcoin. It will drop from ~2% less than 1% of the total supply. This has a huge impact on stock-to-flow (new supply vs demand). Basically demand is high when supply isn't available.

We can also infer supply will decrease because we are seeing more and more people holding the bitcoin for longer and longer periods of time. Additionally, keys are being lost, making some bitcoin permanently inaccessible.

Finally, for the sake of length, let's look at the money reduction every block. Going from 6.25 BTC to 3.125 BTC is obviously a loss of 3.125 BTC. At $20k/coin, this is a loss of $62,500 every 10 minutes, or $9m/ day (the largest reduction in dollars we've ever seen).

Now, a BofA analysis last year determined it took ~$93m to move the price of Bitcoin 1%. This means that after just 10 days, we see a 1% increase in price. However, as buy orders get executed, it takes less and less of an inflow to increase the price by more and more dramatic amounts. By doing some analysis on CB's, Binance's, and Bitfinex market book, the market density changes pretty dramatically after a 2% increase. It's safe to assume that $1b of inflow would give us ~30% increase in price. This would be achieved in simply 3 months.

Add on top of that FOMO, higher adoption, less friction of use, etc, we could see the top really blow off.

TL;DR- New supply goes down, demand goes up. Price goes up.