The Bullish Case for the Bittensor Halving
December 2025 will mark Bittensor's first halving. And the mood around it is mixed. Some are calm, confident the network will adapt. Others feel uneasy, sensing that protocol change might be needed. This doesn’t surprise us.
If you dig back into the lore of Bitcoin's first halving, the mood feels eerily familiar: pessimists convinced that Bitcoin would death spiral, while optimists believed the system would adapt because the incentives demanded it.
TLDR, the pessimists were wrong. Bitcoin lives on today, proving that programmatic monetary policy actually works. We think Bittensor’s halving will play out the same way.
But the key difference between Bitcoin and Bittensor is that Bittensor has two tokens—TAO and Alpha (subnet tokens)—each on different halving schedules, adding a layer of complexity.
We'll break it down, but our long-term view said upfront is this: the halving is bullish for TAO and for subnet tokens, even if, like Bitcoin, the timing of that impact is hard to model.
The TLDR
For readers who’d rather skip the details, here’s the short version.
For TAO, emissions will be cut in half, meaning less TAO enters circulation and less can be sold. This is simply bullish.
Think of it this way: on Bitcoin, miners earn BTC directly, and the halving reduces how much they earn and can sell. On Bittensor, subnets earn TAO instead, and the halving means less TAO flows into those subnets, so less is available for miners, validators, and owners to sell.
For subnet tokens, it’s more nuanced. A subnet at its core is just a liquidity pool. The TAO halving will cut the chain’s liquidity injections in half. With tighter liquidity comes higher volatility, meaning price moves get amplified in both directions.
As an example, if subnet markets (the Sum of Prices) rose 1% last week under today’s liquidity, that same flow post-halving could’ve moved prices roughly twice as much at the margin. The direction of net flows becomes the only variable that matters for subnet prices.
Here’s how we see it:
Bittensor remains the undisputed AI x Crypto leader.
TAO’s abrupt price recovery following the brutal altcoin liquidation cascade on Oct. 10th signals strength.
Subnet markets (i.e., Sum of Prices) look to have bottomed.
The leading Subnets’ fundamentals are improving, with buybacks starting to drive real revenue into tokens.
Products like Yuma’s Asset Management for subnets, Grayscale’s public TAO trust filing, and the potential launch of more Bittensor DATs will make subnet exposure more accessible to institutions and retail.
TAO staking (Root) yield continues to trend downward which should continue to push TAO into subnets as investors work to avoid dilution/capture upside.
So our view is: we think subnet flows are about to turn positive. And in a post-halving world where volatility is higher and liquidity is tighter, that’s a tailwind for subnet tokens.
The Details
The Bittensor protocol distributes TAO to subnets by injecting it into each subnet’s liquidity pool in proportion to the subnet token’s (Alpha’s) price. This system was introduced with the Dynamic TAO Upgrade in February 2025, transitioning Bittensor’s emission allocation system to a market-driven one.
The TAO injections into the pools are designed to keep subnet prices stable. When the chain injects TAO into one side of the pool, it simultaneously injects Alpha into the other to maintain balance. After the halving, TAO injections will drop by 50%, and the corresponding Alpha injections will automatically fall as well to prevent the price from moving.
For example, if a subnet currently holds a 10% emission share and trades at 0.1 TAO (assuming the Sum of Prices is 1 for simplicity), it receives 0.1 TAO and 1 Alpha per block. Post-halving, that same subnet will receive 0.05 TAO and 0.5 Alpha per block.
The main effect is that TAO and Alpha liquidity in subnet pools will grow slower. Thinner liquidity means higher volatility to both the upside and downside. Basically, subnet tokens will trade with higher beta.
This impacts miners most. They’re structural sellers with dollar-denominated costs, so they routinely sell Alpha for TAO (and then TAO for USD) to cover expenses. After the halving, thinner liquidity means each Alpha sale yields fewer TAO because there’s less TAO depth and more slippage. As a result, less TAO will be pulled from subnet pools and sold on the market.
Subnet owners can counteract this imbalance by reducing miner emissions by roughly 50%, effectively creating an “Alpha halving.” This wouldn’t perfectly restore pre-halving conditions, but it would bring the system much closer to equilibrium. By cutting the amount of Alpha entering circulation, subnets would slow the rate of Alpha selling into thinner TAO pools, preventing liquidity from draining faster. Reducing Alpha emissions alongside TAO halvings would stabilize subnet prices and ease volatility across the network.
Alternatively, subnets that (over time) double structural demand (likely through buybacks) could offset the halving’s impact and reduce the need to cut miner emissions.
The Impact
The immediate effect of the halving is that subnets will earn less TAO. That pressure will push less efficient miners offline, which is a pattern seen after every Bitcoin halving.
Weaker subnets will also struggle. With half the TAO flowing in, liquidity growth slows, miner margins tighten, and maintaining participation becomes harder. This will reinforce a Pareto distribution, where emissions consolidate toward the strongest subnets. In effect, the network reallocates TAO from weak subnets to strong ones.
At the same time, it will be more challenging for new subnets bootstrapping liquidity. They’re competing over fewer units of TAO emissions, which means less value flowing into the dTAO system overall, and new subnets are starting from zero. Since Alpha injections into pools are also halved, the circulating supply of newer subnets will grow more slowly than older ones. A lower circulating supply keeps root prop higher for longer, meaning systematic sell pressure lingers for new subnets more than it did for their predecessors.
But that’s only one side of the equation. If TAO’s price rises as a result of reduced sell pressure, subnet owners may not need to cut miner emissions as deeply or at all. Miner margins could return to pre-halving levels, and the challenge of bootstrapping liquidity for new subnets would ease as the dollar value of TAO emissions rises. Like Bitcoin, this effect likely won’t play out overnight, but will build gradually as the structural reduction in supply catches up to demand.
Anti-fragility
There will be shocks. There will be volatility. And it will take time for the reduction in supply to have an effect on the system. But there’s no reason to doubt programmatic monetary policy after seeing it succeed with Bitcoin. And with a community just as committed, we believe Bittensor will follow the same path.
Nassim Taleb argues that low volatility breeds fragility because it hides stress until a system breaks. By contrast, systems that face regular shocks grow stronger. Bittensor’s halving is one of those shocks. It’s an inadvertent one that stress-tests and hardens the network. It’s the first of many, and if the network is to thrive for decades, it has to be forged in fire.
This content is provided for informational purposes only and does not constitute investment advice or a recommendation to buy or sell any security. Unsupervised Capital holds a position in TAO and may hold positions in the subnet tokens or other digital assets discussed herein and may buy, sell, or change positions at any time. Past performance is not indicative of future results. Digital assets involve substantial risk, including potential total loss of capital. Consult your own advisers regarding any investment decisions.
