Approximately every 210 000 blocks the Bitcoin protocol halves the block-reward paid to miners, cutting the flow of new supply by 50
%. We exploit the three exogenous halving events that occurred between 28 November 2012, 9 July 2016 and the run-up to May
2020 to identify how this programmatic supply shock propagates into price dynamics. Using a difference-in-differences framework
that compares Bitcoin to a synthetic basket of 2 241 altcoins, high-frequency order-book data from 26 exchanges, and a structural
vector-autoregression with sign-restrictions, we find that the halving cycle explains 37 % of the post-2012 price appreciation and
generates an average abnormal return of 142 % within 360 days after the event. The effect is front-loaded: half of the cumulative
price response materialises in the 120 days preceding the halving, consistent with rational expectation models in which investors
anticipate the supply reduction. Network fundamentals—hash-rate, transaction volume and fees—co-move with price, but Granger-
causality tests show that price leads fundamentals by two to four weeks, indicating that the halving operates primarily through a
demand-side “attention channel” rather than through marginal production cost. Cross-sectional analysis of 1.4 million individual
wallets reveals that long-term holders (addresses dormant >1 year) reduce net selling by 28 % after the halving, amplifying the
supply squeeze. Implied volatility surfaces from options markets flatten asymmetrically, reflecting a decline in downside variance risk
premium of 250 basis points. Robustness checks using randomly placebo halvings and a Bayesian structural time-series model
confirm that the estimated impact is not confounded by macroeconomic shocks or exchange-specific frictions. Our findings imply that
deterministic, rule-based monetary policy can have large, predictable effects on asset prices even in the absence of cash-flows or a
central issuer.