Every four years, Bitcoin’s supply is halved, making the asset twice as rare.

While theories say that price should therefore double, Bitcoin analyst Nic Carter recently stated that the halving likely did not have a meaningful effect on price action.

halving enthusiasts look away now!!! https://t.co/cxvoDCRO0y

— nic carter 🧊 (@nic__carter) November 19, 2020

Carter’s statement is likely a simplification of what remains a complex economic mechanism built into the network. The crux of the matter lies in whether Bitcoin is an efficient market, one that reacts in real-time to developments in the news and wider financial markets. 

BTC was likely inefficient in its infancy when arbitrage opportunities between different fiat currencies and Bitcoin were possible.

Now, after its third halving event, the asset has become a much different beast.

The efficient market hypothesis holds that Bitcoin’s halvings are “priced in,” meaning the market has anticipated the events long in advance and factored each halving into Bitcoin’s price. While the price has risen after the 2012 and 2016 halvings, two halvings don’t provide enough data to gauge a trend, and it will take decades to map out the effect of halvings on price accurately.

My latest: an attempt to explain the efficient market "hypothesis" from scratch, and how it relates to Bitcoin.https://t.co/ub71sYHrZs

— nic carter 🧊 (@nic__carter) January 4, 2020

On the other hand, the stock-to-flow model for Bitcoin scarcity holds that Bitcoin’s diminishing supply is bound to increase the price. The model indicates how many years it would take to produce the current supply of Bitcoin at the current production rate, with the conclusion being that Bitcoin could be above $100,000 by the end of 2021.

The model was popularized by Plan B on Twitter and supported by commentators such as Dan Held, head of growth at Kraken and formerly Uber.

Bitcoin stock to flow model animated.

by @100trillionUSD pic.twitter.com/h9iFTHJ5fQ

— Dan Held (@danheld) November 29, 2020

Held has even gone on to say that Bitcoin could go as high as $1 million. 

Speaking to Crypto Briefing, Held stated that the wider financial markets have not priced in events like the Bitcoin halving, referring to the fact that many entrants are not yet aware of the event. 

“Simply put, 99% of investors have never seriously considered it,” says Held.

While Bitcoin recently peaked above an all-time high, the consensus remains that the latest halving has not given Bitcoin the major lift many were expecting.

Economist and Bitcoin analyst Alex Kruger spoke to Crypto Briefing, stating that halvings likely aren’t as big a driver as stock-to-flow supporters believe, citing other factors at play in the markets.

The discussion also redefines what “priced in” means. 

Of course, the creation of new Bitcoin reducing in half matters. But “many other variables matter as well,” says Kruger, adding that “the main variables behind this bull run are institutional and high-net-worth individuals demand, and Paypal.”

Kruger believes that while “the 2020 halving did drive the price higher before coronavirus hit” to some degree, “subsequent halvings won’t have as much of an impact.”

According to this theory, unexpected events such as the memo Paul Tudor Jones, which revealed that the billionaire hedge fund manager had between 1 – 2% of his assets in Bitcoin, was far more significant to the bull run than the latest halving.

Events such as the U.S. Presidential elections are likely playing a role too. 

Concluding, the halving discussion rages on.

There simply isn’t enough data for such a new asset class to pinpoint the effects of specific events. But if one is to follow the stock-to-flow model, and BTC reaches $100,000 by the end of next year, perhaps that will settle the matter entirely. 

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