Bittensor (TAO) is fast approaching its first halving event. This event, which is expected to take place in December, has significantly fuelled discussions about TAO's future price trajectory. Much like Bitcoin, the Bittensor halving is a pre-determined event that halves the rewards for network participants. However, this has a unique, profound impact on the decentralised AI (DeAI) ecosystem. Experts anticipate that the coming weeks will usher in a period of increased volatility and speculation.

What is the Bittensor Halving?

The Bittensor halving is a mechanism that halves the issuance of new TAO tokens once the circulating supply reaches a certain point (approximately half of the total maximum supply of 21 million TAO). This is comparable to the Bitcoin halving, which has occurred several times, most recently on 20 April 2024. Each time such a halving has taken place, there has been a noticeable effect on the Bitcoin price. The same expectations exist for the Bittensor price. Currently, a TAO block is mined approximately every 12 seconds, resulting in 7,200 blocks per day. This will halve to 3,600 per day in about a month.

Why is this so important?

Creating Scarcity: By reducing the issuance of new tokens, TAO becomes scarcer. Historically, this can cause upward pressure on the price if demand remains level or increases.
DeAI Ecosystem: Unlike a 'standard' Layer-1 halving, Bittensor involves more than just a reduction in rewards. The entire ecosystem revolves around rewards (emissions) and incentives for the subnets (specialised AI marketplaces within the network). Therefore, the halving of rewards has consequences for the financial incentives of the miners and validators within these subnets.

TAO Price Expectation in Two Phases

Analysts suggest that the TAO price may follow a pattern also observed in other Proof-of-Work crypto assets, such as Bitcoin:

Phase 1: The ‘Pre-Halving Rally‘

We often see a strong rally in the one to two weeks leading up to the halving. Traders anticipate the future scarcity and try to position themselves, which can drive up demand and thus the price. TAO is one of the few projects in crypto with a clear, Proof-of-Work driven emission schedule, which may amplify this effect.

Phase 2: The ‘Sell the News‘ Correction
Historically, the market often prices in a halving early. This means that when the event actually takes place, many traders take their profits. This is known as the 'sell the news' effect and can lead to a sharp, but often temporary, correction in the days immediately before or after the halving.

Current Bittensor (TAO) price since November 1. Source: TradingView

Consequences for the Subnet Ecosystem

The most complex dynamic will play out within the Bittensor subnets. Miners and operators must remain profitable. When TAO rewards halve, the corresponding subnet tokens must increase in value to maintain the rewards for AI computing power. Analysts anticipate a Pareto distribution between stronger and weaker networks, meaning that around 20% of the networks will receive the majority (approximately 80%) of the rewards. This smaller proportion of subnets will deliver the strongest liquidity and highest efficiency, causing their subnet tokens to rise in value.

The weaker networks that cannot sustain their incentives may come under heavy pressure. It will become harder for them to remain profitable, potentially leading to problems for the subnets or even their removal. In short, the halving could lead to a chaotic, but ultimately more efficient competition, where only the most valuable and robust AI networks survive.

Bittensor (TAO) Price: Technical Analysis

The price of TAO is currently hovering around $378. Following a recent peak towards $500, the price is moving sideways, which is typical of a consolidation phase before a larger move.

Support: The main support zone is in the $350–$365 area. This region has repeatedly caused a price bounce. If the price slips below it, a drop towards $320 may follow.
Resistance: The heavy resistance zone lies between $450–$500. TAO needs to break through this level to make the momentum fully bullish ahead of the halving. A successful break above would pave the way for a retest of the $530–$560 levels.

The market is currently in a building zone (accumulation zone), where traders establish positions in anticipation of the expected volatility. Whatever the price does, the approaching halving makes increased volatility almost certain.

Disclaimer: This is not financial advice. The crypto market is volatile and investing carries risks. Always conduct your own research before investing.