Why does the halving increase the price?

[odolvlobo]

Why would people invest loads of money in BTC after the halving and not before?  

People choose to invest in the BTC market post-halving due to a reduction in its supply, which will increase demand, and you know that when supply becomes low and people demand anything high, it increases price pressure.

...when halving is happening Bitcoin supply is cut into half, meaning that the scarcity will make price to increase.

It's simple demand and supply. There's always demand for Bitcoin so when the supply reduced (in this case just the circulating supply and not total supply) it'll make the price to go up and that's why the halving increase the price.

Those are repeating a very common misconception.

First, the supply is not reduced by the halving. Instead, the increase in the supply is reduced. The supply increases with every block until it reaches 21 million.

Second, reducing the supply does not increase the demand. In general, supply and demand are independent functions.

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[suzanne5223]

Why would people invest loads of money in BTC after the halving and not before?  

People choose to invest in the BTC market post-halving due to a reduction in its supply, which will increase demand, and you know that when supply becomes low and people demand anything high, it increases price pressure.

...when halving is happening Bitcoin supply is cut into half, meaning that the scarcity will make price to increase.

Those are repeating a very common misconception.

First, the supply is not reduced by the halving. Instead, the increase in supply is reduced. The supply increases with every block until it reaches 21 million.

Second, reducing the supply does not increase the demand. In general, supply and demand are independent functions.

You're right. The halving is not about the Bitcoin supply being cut in half, etc. However, to avoid further misconception it's better to explain this way.
The halving is an act of creating or maintaining BTC scarcity and it's technically an act of splitting in half the miner's reward.
It's a policy created by Satoshi to counteract inflation in the market to increase demand.

[KingsDen]

You're right, three data points aren't a large enough sample to definitively claim a pattern but remember that the halving happens every 4 years, so I think you can take that into consideration. It reduces the rate of new coins entering circulation potentially leading to price increase. Some investors may prefer to wait for confirmation of the impact before committing. Others might see the potential for higher returns after the event. Individual investors are the key players before and now it’s the institutional adoption for the major price appreciation.

Three data points are not large but good enough to work with;
Many people have been saying about the reduction of miners reward;
Reduction of new coins entering the market;
And many more reasons why halving increases the price;
I acknowledge that the above are all reasons;
But remember that the hype and expectations that this will happen is the reason people indirectly change their behavioural attitude to make it happen!
The social media hype when the coin starts rising is another factor.

[Etranger]

There's nothing special about halving or specific reason why the price will increase but I think people investing in Bitcoin because when halving is done the reward in mining will be reduced in half meaning that the new BTC that is mined are not the same as before. It is now normal to invest in btc when halving is near. When you think about it where the mining reward is halved then that only means that if many people are acquiring btc then it would be very hard to accumulate since the reward is halved and the more people buy then the more they are willing to pay higher price just to obtain btc hence price increases.

Yes, the demand usually increases before halving, because more and more people are willing to catch the train.However, the rise of the price can also be explained by "the math" essential for bitcoin. The reward for the miners becomes less, but there still have to be reasons for them to keep mining, that is why we can observe some kind of a compensation as the price is going up.

[Seinlocko]

A few random beginner questions:

- There have been 3 halvings, and in all of them the BTC price was insignificant compared to what it is today. Am I the only one who thinks that it is premature to speak of a pattern when something only happened 3 times before, and in completely different price ranges? Buying 1 BTC was realistic for many people before the first 3 halvings. Now that is no longer the case.

- Why would people invest loads of money in BTC after the halving and not before?
....

In recent years, the price of Bitcoin could be said to be cheaper than it is now. The low price makes it easier to buy bitcoin in larger quantities. But nowadays, even though the price of bitcoin is no longer what it used to be when it was still cheap, in my opinion, don't ever give up investing just because it's difficult to buy whole bitcoins. Because bitcoin still has a lot of potential to continue to experience price increases.

And the question is, why are more people investing their money in Bitcoin during the halving? I think the answer is because they are interested in making a profit in a bull market.

[CryptopreneurBrainboss]

There's nothing special about halving or specific reason why the price will increase but I think people investing in Bitcoin because when halving is done the reward in mining will be reduced in half meaning that the new BTC that is mined are not the same as before.

There's something special and that is what you just pointed out. When something is having the same effect whenever it happens, it means there's something special about that event. Bitcoin halving was preprogrammed from the birth of Bitcoin.

It didn't just come from anywhere but was put by satoshi himself because it's special and has great importance. Without the halving, the market wouldn't have had an identity. I don't believe there would had been a four years cycle of Bitcoin. It's the halving that's the mark of the bull market. The halving is what we look up to, the halving makes the circulation of Bitcoin coming into the market to reduce. What this means is that with the same adoption, there'll be lesser amount of Bitcoin available for trading and this increase the price of available Bitcoin.

It's simple demand and supply. There's always demand for Bitcoin so when the supply reduced (in this case just the circulating supply and not total supply) it'll make the price to go up and that's why the halving increase the price. Obviously there are other factors to contribute to this too but we're focusing on just halving for this discussion.