Will the price of Bitcoin explode after the halving? What AIs think about it

During the night of April 19 to 20, 2024, the fourth Bitcoin halving occurred at block 840,000. This scheduled event halves the mining rewards from 6.25 to 3.125 bitcoins per block. This change, which occurs approximately every four years, aims to control inflation and slow down the issuance of new bitcoins, which is capped at 21 million. This mechanism, designed to limit inflation, directly affects the supply of new bitcoins and is often followed by a significant increase in prices, as observed in previous halvings, sparking increased interest in its long-term economic implications.

The Generative AI Experiment versus BTC

What is Generative AI?

Generative artificial intelligence encompasses models that can generate new and relevant content, from text to images and music. These systems use vast amounts of data to learn patterns of behavior and creation, enabling applications ranging from simple textual assistance to complex decision-making based on data understanding and analysis. Their ability to analyze and predict trends from complex data makes them particularly relevant in financial analysis, especially for volatile assets like Bitcoin.

This capability of generative AI models to analyze and predict trends from complex data will be tested in this experiment. We explore whether these advanced models could be particularly relevant for financial analysis, focusing on volatile assets such as Bitcoin. The goal is to see to what extent these AIs can provide reliable and useful forecasts on price fluctuations post-halving, an event that has historically impacted the value of this cryptocurrency.

Presentation of the AIs in Competition

To examine the implications of the latest Bitcoin halving, we sought the perspectives of several leading AIs in the field of economic forecasting and market analysis. Four cutting-edge generative AI models were queried:

  1. Mixtral 8x7 by Mistral: This expert-mixing network, while focused on token-by-token processing, brings an innovative approach with dynamic expert selection to optimize information processing.
  2. Reka CORE: An outsider in recent weeks, this advanced AI model is developed by Reka, a company specializing in artificial intelligence. It stands out for its ability to solve complex problems and adapt to varied situations. Reka CORE is designed to be scalable and customizable, making it (according to its creator) an ideal choice for applications requiring powerful and flexible artificial intelligence.
  3. LLama 3 70b by Meta: With 70 billion parameters, this model has set a new standard in large-scale Open Source models. It offers significant improvements in understanding, code generation, and instruction following, making it particularly competent for complex analyses.
  4. ChatGPT-4 by OpenAI: The fourth in the series of GPT models, this multimodal model was launched in March 2023 and is available on multiple platforms. Its ability to process and generate multimodal content makes it particularly suited for analyzing diverse scenarios.
  5. Claude Opus by Anthropic: Touted as the most intelligent model, Claude Opus excels in various AI system evaluation benchmarks, demonstrating human-like understanding and reasoning skills on complex tasks.
  6. Google Gemini: Developed by Google AI and DeepMind, Gemini stands out as a cutting-edge multimodal generative AI model, stemming from the same technological lineage as the Gemini models. Available in three sizes (Ultra, Pro, and Nano) to suit various needs, Gemini offers remarkable capabilities across a wide range of tasks.

Can Generative AIs Be Relevant in Finance?

Generative artificial intelligence models, particularly in finance, represent a significant divergence from traditional financial analysis methods. Unlike human decision-making processes, which are often subject to cognitive biases and limited data processing capabilities, generative AIs operate on principles of probabilistic reasoning, free from such constraints. Humans tend to rely on heuristics and past experiences in their decision-making, which can lead to systemic errors when dealing with complex or ambiguous data. In contrast, AIs, with their ability to process and analyze large amounts of data exhaustively, could eliminate these biases, allowing for a more precise and empirically based analysis.

Functioning of Probabilistic Reasoning in AIs

Artificial intelligence models, particularly those based on deep learning and neural networks, function by learning conditional probability distributions from massive data. This method, known as probabilistic reasoning, allows models to assess all possible outcomes and their respective probabilities. In finance, this could translate into the ability to predict structural price trends, identify underlying macroscopic market patterns in Web3, and simulate future economic scenarios with a considerable degree of accuracy, whether for TradFi or DeFi. These predictions are based on the statistical absorption and transcription of past and current events, rather than on intuition or subjective experience.

Analogy Between the Functioning of AIs and the Human Brain

It is fascinating to observe the parallels between the functioning of artificial neural networks and the human brain. Artificial neurons, like biological neurons, process information by establishing weighted connections between various inputs and outputs. These connections are continuously adjusted through learning processes (e.g., backpropagation), simulating a form of "synaptic plasticity" observed in the human brain. This adaptability allows AI models to improve and adjust based on new data, just as the human brain adapts to new information or experiences. Additionally, recent advancements in neural network fields, such as transformer architectures, demonstrate an increased capacity to handle long and complex temporal sequences, reflecting the human brain's ability to process and remember information over extended periods.

Bitcoin Price in 2025: What Do the AIs Say?

1. Mixtral 8x7's Optimistic Approach to Predicting Bitcoin's Price

First and foremost, it is essential to understand that the price of Bitcoin is influenced by several factors, including supply and demand, regulation, mainstream adoption, and technological innovations. During a "halving," the reward for mining Bitcoin is halved, meaning the quantity of new Bitcoin entering the market is also reduced by half. This can lead to a reduction in supply and, consequently, an increase in demand, which may result in a price rise.

By examining the provided price history, we can observe that Bitcoin's price has increased after each halving to date. Following the 2012 halving, Bitcoin's price rose from $12.5 to an ATH (All-Time High) of $1,163 in that cycle. After the 2016 halving, the price increased from $638.51 to an ATH of $19,333, and after the 2020 halving, it rose from $8,475 to an ATH of $68,982.

Using these data, we note that Bitcoin's price has increased by an average of about 11 times after each halving. If we want to predict the price of Bitcoin after the next halving scheduled for 2024, we could multiply the current price of $63,350 by 11, which gives us a forecasted price of $696,850.

However, it is important to note that this calculation is purely speculative, and Bitcoin's price is subject to high volatility and many unpredictable factors. Therefore, this figure should not be regarded as an accurate prediction but rather as an estimate based on historical trends.

In summary, using Bitcoin's price history and assuming that the price of Bitcoin will continue to follow the trend after the next halving in 2024, we can expect Bitcoin's price to reach an ATH of $696,850. However, it is important to note that this is an estimation, and the actual price of Bitcoin can be affected by many unpredictable factors.

2. Reka CORE's Enthusiasm for BTC's Rise in the Next Cycle

To estimate the All-Time High (ATH) for Bitcoin's fourth cycle following the 2024 halving, we can utilize an approach based on the geometric growth trend of previous ATHs.

Here are the ATHs from previous cycles and their growth:

- Cycle 1: ATH $1,163, growth of 9,252% from the halving price ($12.5)
- Cycle 2: ATH $19,333, growth of 16,625% from the halving price ($638.51)
- Cycle 3: ATH $68,982, growth of 255.5% from the halving price ($8,475)

If we take the average growth of these three cycles, we get: (9,252% + 16,625% + 255.5%) / 3 ≈ 8,408%

Applying this average growth to the halving price of cycle 4 ($63,350), we get: Estimated ATH for cycle 4 = $63,350 × (1 + 8,408%) ≈ $543,000

However, it is important to note that this estimate is based on historical trends and does not account for the many economic, regulatory, and technological factors that could influence Bitcoin's price in the future. Therefore, it is advisable to remain conservative and consider this estimate as merely an indication of the potential market direction. A more realistic and conservative ATH for cycle 4 might range from $200,000 to $400,000.

3. LLama 3 70b's Position on the Evolution of the Bitcoin Market

To predict the future All-Time High (ATH) price of Bitcoin, we can attempt to identify a pattern in the historical data. Let's analyze the given information:

- 2012 Halving: Reward = 12.5 BTC, ATH = $1,163
- 2016 Halving: Reward = 6.25 BTC, ATH = $19,333
- 2020 Halving: Reward = 3.125 BTC, ATH = $68,982

We can observe the following patterns:
a. The reward is halved every four years, a fundamental design principle of Bitcoin. b. ATH prices appear to increase exponentially, with each cycle's ATH significantly higher than the previous.

Let's model this exponential growth using a simple power relationship:
ATH = a * (Reward)^b where 'a' is a constant, and 'b' is the exponent.

Using historical data, we can estimate the values of 'a' and 'b'.

Using a log-log regression, we estimate: a ≈ 10^5.23 and b ≈ 3.33

Now, using this model to predict the ATH for the 2024 halving:

Reward (2024) = 1.5625 BTC (half-reward from 2020)
ATH (2024) ≈ a * (Reward)^b
≈ 10^5.23 * (1.5625)^3.33
≈ $253,000

According to this model, the predicted ATH for the 2024 cycle is approximately $253,000.

Remember, this prediction is highly speculative, and the future is inherently uncertain. Many factors can influence the price of Bitcoin, and this model is based on a limited dataset. It is therefore essential to take this prediction with a grain of salt and consider it as one of many possible scenarios.

4. ChatGPT-4's Analysis of Bitcoin Trend Post-Halving

To estimate the potential All-Time High (ATH) of Bitcoin after the 2024 halving, we can examine how the price has evolved during previous post-halving cycles. Here's a summary of the provided data:

- 2012: Halving price = $12.5, Cycle ATH = $1,163
- 2016: Halving price = $638.51, Cycle ATH = $19,333
- 2020: Halving price = $8,475, Cycle ATH = $68,982

First, let's calculate the multiplication factor between the halving price and the cycle's ATH for each cycle:

- 2012: 1163 / 12.5 ≈ 93
- 2016: 19333 / 638.51 ≈ 30
- 2020: 68982 / 8475 ≈ 8.1

The multiplication factors show a decreasing trend. This might indicate a maturation of the market or a diminishing impact of halvings on prices over time. If this trend continues, the multiplication factor for the 2024 cycle might be lower than that of 2020.

Assuming it decreases similarly to the reduction from 2016 to 2020:
- Approximate reduction = 30 - 8.1 = 21.9 (percentage decrease ≈ 0.73)
- New factor for 2024 ≈ 8.1 × (1 - 0.73) ≈ 2.2

Applying this factor to the Bitcoin price at the 2024 halving: Estimated 2024 ATH = $63,350 × 2.2 ≈ $139,370

Thus, a conservative estimate might place the Bitcoin ATH for the post-halving 2024 cycle around $139,370.

However, it is important to note that these estimates are highly speculative and depend on many external factors such as regulation, adoption of blockchain technology, global macroeconomic conditions, and market sentiment.

5. Claude Opus's Perspective on the Impact of the Halving

To estimate the All-Time High (ATH) of Bitcoin for the post-halving 2024 cycle, we can rely on historical data and trends observed during previous halvings. Here is my detailed reasoning:

1. Calculation of the ATH/halving price ratio for each cycle:
- 2012: $1,163 / $12.5 = 93.04
- 2016: $19,333 / $638.51 = 30.28
- 2020: $68,982 / $8,475 = 8.14

2. Observing the Decrease in Ratio:Each cycle shows a decrease in the ratio, consistent with the theory of market adoption and maturation.
Let's calculate the average rate of decrease:
- Decrease from 2016 vs. 2012: (30.28 - 93.04) / 93.04 = -67.45%
- Decrease from 2020 vs. 2016: (8.14 - 30.28) / 30.28 = -73.12%
- Average rate of decrease: (-67.45% - 73.12%) / 2 = -70.29%

3. Applying the Rate of Decrease to the Previous Cycle's Ratio to Estimate 2024's Ratio:
- Estimated 2024 ratio: 8.14 * (1 - 0.7029) = 2.424.

4. With a 2024 halving price of $63,350, we can estimate the ATH:
- Estimated 2024 ATH: $63,350 * 2.42 = $153,307

However, other factors could influence the price:
1. Increasing adoption of Bitcoin by institutional investors and ETFs could support demand and thus the price.
2. Rising electricity and raw material costs could make mining less profitable, potentially reducing miners' selling pressure.
3. The development of decentralized finance (DeFi) and other Bitcoin use cases could boost adoption and demand.

Incorporating these factors, we could consider a more optimistic scenario where the decay ratio is less significant, say -60% instead of -70.29%.

In this case:
- Estimated 2024 ratio (optimistic scenario): 8.14 * (1 - 0.6) = 3.26
- Estimated 2024 ATH (optimistic scenario): $63,350 * 3.26 = $206,521

Based on historical data and considering the decay of the ATH/halving price ratio, the ATH for Bitcoin in the post-halving 2024 cycle could be around $153,307. However, in a more optimistic scenario incorporating institutional adoption, ETFs, DeFi, and other factors, the ATH could reach $206,521.

6. Gemini's Multiple Post-Halving Scenarios

The Bitcoin halving event that occurred on April 19, 2024, halved the mining reward for new bitcoins from 6.25 BTC to 3.125 BTC. This event has significant implications for the price of Bitcoin, as it reduces the rate of new token issuance and potentially affects the supply and demand dynamics.

Detailed Analysis
To estimate the potential price of Bitcoin after the 2024 halving, it is crucial to consider various factors, including:

Historical Halving Cycles: Previous halving cycles have historically been followed by significant periods of price growth for Bitcoin. For instance, after the 2012 halving, the price of Bitcoin jumped from $12.5 to $1,163, and after the 2016 halving, it climbed from $638.51 to $19,333.

Reduction in Mining Rewards: The halving of mining rewards decreases the number of new bitcoins entering the market, which can contribute to a scarcity of the asset and upward pressure on prices.

Drawdown and Rising Electricity Costs: The cost of mining Bitcoin has increased over time, due to the rising difficulty of the network and increasing energy consumption. This may prompt some miners to exit the network, which could reduce selling pressure and support the price.

Institutional Adoption: The increasing adoption of Bitcoin by institutional investors, such as hedge funds and publicly traded companies, could stimulate demand and drive up prices. The approval of Bitcoin ETFs by the U.S. Securities and Exchange Commission (SEC) could play a significant role in this area.

Price Estimation
Considering these factors, it is possible to estimate a potential price range for Bitcoin after the 2024 halving:

- Conservative Scenario: In a conservative scenario, assuming Bitcoin follows a growth trajectory similar to previous halving cycles, the price could reach between $200,000 and $500,000 by the end of 2024.

- Moderate Scenario: A moderate scenario takes into account increased institutional adoption and a reduction in selling pressure due to rising electricity costs. In this case, the price of Bitcoin could reach between $500,000 and $1,000,000 by the end of 2024.

- Optimistic Scenario: An optimistic scenario assumes massive adoption of Bitcoin by institutions and a significant shortage of supply due to the reduction in mining rewards. In this scenario, the price of Bitcoin could exceed $1,000,000 by the end of 2024.

Conclusions and Precautions: What Should We Take Away?

It is essential to emphasize that, despite their sophistication, the forecasts presented by generative artificial intelligence models remain predictions. They are based on analyses of historical and current data, incorporating statistical and probabilistic models to extrapolate future market movements. However, the cryptocurrency market, particularly Bitcoin, is influenced by a multitude of factors that may include regulatory changes, macroeconomic fluctuations, and unpredictable market dynamics. These elements can all substantially alter the predicted trends.

Nevertheless, by considering a set of consistent indicators from several leading AI models, it is possible to envisage an increase in the price of Bitcoin to between $100,000 and $200,000 following the halving. This estimate is not a certainty but rather a projection based on sophisticated data models and a deep understanding of past trends. Predictions, although based on advanced analyses, should be approached with caution and considered as one of many pieces of the puzzle in financial decision-making.

While recognizing the value of insights generated by generative AIs, it is crucial for investors and analysts to continue monitoring the market, adapt their strategies in response to new information, and approach predictions with a critical mind and rigorous analysis. AI technology offers powerful tools, but these tools should be used as a complement to, not a substitute for, human vigilance and financial expertise.

AI vs. Human ;)

And you, what's your prediction? Come share your thoughts on our X/Twitter poll and see if human collective intelligence can outperform generative intelligence... or not :)

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