Bitcoin’s price rarely moves in a straight line. Instead, it tends to rise and fall in multi-year “market cycles” shaped by a mix of psychology, liquidity, macroeconomic conditions and crypto-specific events. One of the most talked-about of those events is the Bitcoin halving, a programmed change that slows the pace of new bitcoin entering circulation. Many people associate halvings with bull markets, but the relationship is more nuanced than a simple cause-and-effect.
This guide explains what the halving is, how it can influence supply and sentiment, why timing matters, and what UK-based investors should keep in mind around regulation, taxation and real-world risks.
What is the Bitcoin halving?
Bitcoin is secured by miners who validate transactions and add new blocks to the blockchain. In return, miners earn a block reward paid in bitcoin. Roughly every four years, the protocol cuts that block reward in half. This event is known as the halving.
The most recent halving took place in April 2024, cutting the block reward to 3.125 bitcoin per block. The next halving is expected around 2028, when the reward is due to fall again to 1.5625 bitcoin per block. The exact date cannot be fixed years in advance because it depends on how quickly new blocks are produced over time.
Why halving can affect price
It reduces the flow of new supply
In any market, price is influenced by supply and demand. The halving does not change how many bitcoin already exist, but it does reduce the rate at which new bitcoin are created. In practical terms, that means fewer newly mined coins are available each day to be sold into the market to cover miners’ costs.
If demand stays the same or rises while new supply growth slows, the market can become tighter. Over time, tighter supply conditions can contribute to higher prices. The key phrase is “over time” because markets react to expectations as well as fundamentals.
It can change miner behaviour and market structure
Mining businesses have ongoing expenses such as electricity, equipment and operational overheads. When the reward halves, some miners may need to sell a larger share of their holdings, upgrade equipment, relocate, or shut down if they are no longer profitable. That adjustment process can create short-term volatility, even though the long-term supply curve becomes more constrained.
It becomes a focal point for sentiment
Crypto markets are heavily influenced by narratives. The halving is simple to explain and easy to put on a timeline, so it often attracts attention from traders, long-term holders and the media. Increased attention can bring in new demand, but it can also encourage speculative positioning that later unwinds.
Crypto market cycles and where halving fits in
Although every cycle is different, market cycles often include these phases:
- Accumulation: A quieter period after a major downturn, when price moves sideways and conviction gradually rebuilds.
- Expansion: Momentum improves, optimism returns and liquidity increases. Bitcoin often leads, with wider crypto following later.
- Euphoria: Prices accelerate, risk appetite peaks, and leverage can build across the system.
- Contraction: A sharp correction or extended bear market as liquidity tightens and speculative excess is cleared out.
Halvings tend to land near the boundary between accumulation and expansion in the popular market narrative, but it is better viewed as one variable among many. Interest rates, global risk sentiment, regulation, exchange liquidity, stablecoin usage and institutional flows can all amplify or dampen the effect in a given cycle.
What history suggests, and what it does not
Previous halvings have often been followed at some point by substantial bull runs, which is why the event carries so much weight in market discussions. However, there are important caveats:
- Timing varies: A halving does not reliably trigger an immediate price jump. Markets can move before the event, stall after it, or react later.
- Magnitude is not guaranteed: As the market matures and becomes more widely held, returns can change. The same pattern does not have to repeat with the same intensity.
- Other forces can dominate: Macro shocks, liquidity conditions and regulatory events can overwhelm halving effects for long periods.
A common misconception: “Halving automatically makes the price go up”
It is easy to assume that cutting new supply in half must push price higher straight away. In reality, markets anticipate known events. Because the halving schedule is public and predictable, traders and investors can position ahead of time. That means part of the expected impact may be “priced in” well before the halving occurs.
Also, the halving changes the rate of new supply, not the total supply already in circulation. Bitcoin already trades in large volumes on exchanges and over the counter markets, so day-to-day price moves are driven heavily by demand, liquidity and sentiment rather than just the mining output.
A more accurate way to think about it is this: the halving can create a tighter supply backdrop, but whether that translates into higher prices depends on whether demand is strong enough, and whether market liquidity supports sustained buying.
UK-specific considerations that matter around halving cycles
Cryptoassets are high risk and protections are limited
In the UK, many cryptoasset activities and holdings do not have the same consumer protections as regulated financial products. If a platform fails, you may not have access to compensation schemes in the way you might with certain regulated financial services. This matters during volatile cycle phases, when operational risk, outages and platform failures historically become more common across the global industry.
Tax: disposals can happen more often than people realise
From a UK tax perspective, a “disposal” is not only selling crypto for pounds. It can also include swapping one cryptoasset for another, using crypto to pay for goods or services, or giving crypto to someone other than a spouse or civil partner. That means active trading during volatile cycle phases can create a larger tax and record-keeping burden than many expect.
Practical habits that help:
- Track every transaction date, amount, and value in pounds sterling at the time.
- Keep records of transaction fees and other allowable costs.
- Do not rely solely on exchange summaries as a complete tax calculation.
Liquidity and access can look different in pounds
Many market charts and commentary focus on US dollar pricing and US trading hours. UK investors often experience a slightly different reality in terms of pound-sterling pairs, spreads, bank transfer timelines and platform availability. During fast markets, the difference between a headline price and the actual execution price can widen, especially on smaller platforms or less liquid GBP pairs.
Practical ways to think about risk during market cycles
If you are trying to understand halving-driven narratives without getting swept up in them, focus on basics that hold up across cycles:
- Volatility cuts both ways: Large drawdowns can happen even in broader uptrends.
- Leverage increases fragility: High leverage can accelerate both rallies and sell-offs.
- Time horizon changes the story: Short-term trading and long-term holding involve very different risks, including tax complexity.
- Operational risk is real: Security, custody and platform reliability matter as much as market timing.
Conclusion
Bitcoin halvings are designed to slow the creation of new bitcoin, which can tighten supply conditions over time and influence market psychology. Historically, halvings have often been associated with major cycle shifts, but they do not guarantee immediate price rises or repeatable outcomes. Demand, liquidity and macro conditions remain decisive.
For UK readers, it is also essential to pair the market narrative with practical realities: limited consumer protections in many cases, a tax system where disposals include swaps and spending, and execution differences in GBP markets. Understanding those real-world factors can make halving cycles easier to navigate with clearer expectations.