TAO First Halving Investment Analysis

TL;DR

Bittensor (TAO) will undergo its first halving around December 14th, reducing the daily supply from 7,200 to 3,600. The current price of $282.83 is in a downtrend, but the derivatives market shows negative funding rates (a bullish signal), and community sentiment is positive, although concerns remain regarding the viability of subnets. Technically, the daily chart shows a bearish outlook, while the short-term outlook is neutral, with support in the $261-$272 range. In summary, the halving is a catalyst for supply shocks, but the price reaction depends on the actual performance of the subnet ecosystem and market sentiment. It is recommended to carefully assess the risks and invest in stages.

Core Analysis

Halving Event Details

Time and Triggering Mechanism

• Estimated date : December 14, 2024 (UTC time)
• Trigger condition : Triggered when the total supply reaches 10,500,000 TAO; as of December 8th, 10,451,753 TAO have been issued.
• Execution method : A block is generated every 12 seconds, and the halving is automatically executed at a specific block height.
• Date Variable : Due to miner registration and redemption activities for TAO and the Dynamic TAO subnet, the specific date may fluctuate between December 12th and 14th.

Changes in issuance volume

• Current reward : 1 TAO per block (approximately 7,200 TAO per day)
• Reward after halving : 0.5 TAO per block (approximately 3,600 TAO per day)
• Impact of inflation : The annual inflation rate decreased from approximately 25.6% to 12.8%.
• Scope of application : Effective equally for Alpha tokens on the TAO mainnet and all subnets.

Supply Economics

• Total supply cap : 21,000,000 TAO (using a Bitcoin-like model)
• Current circulating supply : 9,597,491 TAO
• Halving cycle : There will be 12 halvings in total, each based on a issuance threshold (10.5M, 15.75M, 18.375M, etc.). The last halving is expected to occur in 2061.

Current market positioning

Market Background

• Increased institutional attention: Grayscale has submitted an application for a TAO trust, marking the launch of Europe's first TAO-backed ETP.
• Strong VC funding: $350 million raised from Polychain and Digital Currency Group
• Corporate Strategy: Oblong pledged $8 million in TAO; TAO Synergies Inc. holds over 54,000 TAO.

On-chain activity analysis

Network scale

• Number of active subnets : 127-129 specialized AI subnets
• Application areas : computing resources, data storage, AI agents, deepfake detection, etc.
• AI model deployment : Over 4,000 models with a parameter scale of 10 trillion.

Cash holdings distribution

• Packaging TAO (wTAO) holders : 12,844 addresses
• Concentration : Top 10 holding 0.02%, Top 100 holding 0.94% (wTAO data)
• Major institutions : xTAO holds over 54,000 TAO; TAO Synergies Inc. focuses on TAO fund management.

Development activity

• Daily active developers : 12-19 people from November 9th to December 8th.
• Code commits : 0-52 commits per day, indicating stable but relatively low-frequency development activity.

Exchange liquidity

• Daily trading volume has fluctuated between $58 million and $329 million over the past 30 days.
• The turnover rate is 0.02-0.12, indicating moderate liquidity.

Community sentiment analysis

Main narrative themes

1. Supply shock theory : This theory compares the halving to a Bitcoin supply tightening mechanism, which is expected to increase scarcity and value.
2. Subnet survival of the fittest : Halving will expose inefficient subnets and reward high-demand, high-innovation, high-quality subnets.
3. Ecosystem Dependence : Emphasizing that TAO's long-term success depends on the actual utility of its subnets, scarcity alone is insufficient to support its value.

Key opinion leader perspectives

Emotional characteristics

• Optimism Level : Dominantly bullish, with some forecasting price targets of $3,000-$5,000 or even a market capitalization of $1 trillion.
• Cautionary factors : Concerns about the increased burden of death/low quantum networks, crowding out by new entrants, and the risk of lack of utility.
• Overall sentiment : predominantly positive, but there is a rational assessment of execution risks and subnet feasibility.

Technical Analysis

Multi-period price trends

Technical indicator signals

• MACD :
  • 1-hour histogram -0.160 (bearish)
  • 4-hour histogram +0.189 (potential bullish divergence)
  • Daily chart +2.389 (bullish divergence appears in a downtrend)
• Moving averages : The price is below the daily EMA12 ($287.11), EMA26 ($305.59), SMA50 ($352.29), and SMA200 ($360.09).

Key price level

• Support levels : $271.76 (1h Bollinger Band lower band) → $272.27 (4h Bollinger Band lower band) → $261.66 (daily Bollinger Band lower band)
• Resistance levels : $290.51 (1h Bollinger Band upper band) → $290.76 (4h Bollinger Band upper band) → $320.10 (daily SMA200)
• Centralized liquidation area :
  • The cumulative long positions liquidated at $270.3 below amounted to $1.76 million.
  • The cumulative short positions closed at $297.5, amounting to $2.05 million.

Derivatives Market

• Open interest : $203.2 million, up 0.31% in the last 24 hours.
• Funding rates : Major exchanges all have negative rates (Binance -0.0088%, Bybit -0.0158%, MEXC -0.0088%), indicating short sellers paying long positions, reflecting bullish sentiment among holders.
• Liquidation data : $686,000 was liquidated in the last 24 hours, including $632,000 in long positions and $54,000 in short positions, indicating that leveraged long positions were squeezed.
• Signal : Negative funding rates coupled with rising open interest indicate contrarian buying, diverging from the decline in spot prices.

Risk factors

Supply-side risks

1. Subnet utility inadequacy : If a subnet cannot provide real demand and value, the scarcity after halving may become a "castle in the air."
2. Miner/validator stress : Halving rewards may cause low-profit participants to exit, impacting network security.
3. Decreased liquidity : Subnet token order books may become thinner, leading to increased slippage.

Market risks

1. "All the good news has been priced in" : The halving expectation has already been fully priced into community sentiment, and when it actually happens, it may be a case of "buy the rumor, sell the fact."
2. Excessive leverage : A large number of long positions are concentrated around $270; a break below this level could trigger a chain reaction of liquidations.
3. Macroeconomic Environment : Overall sentiment in the AI ​​sector and the overall trend of the crypto market influenced TAO's independent performance.

Technical risks

• The daily chart clearly shows a downward trend, with all major moving averages above the current price forming strong resistance.
• The daily RSI is near oversold territory at 42.02, but no reversal signal has yet formed.
• If the $261 support level is breached, the next support level may be in the $240-$250 range.

in conclusion

Investment value assessment : Neutral to slightly positive, with potential for event-driven catalysts but execution risks exist.

The first TAO halving has a theoretical basis for a supply shock, with the daily new supply halved (7,200 → 3,600 tokens), which will reduce inflationary pressure and enhance scarcity. Increased institutional attention (Grayscale Trust, European ETP) and a $350 million VC funding round indicate long-term investment confidence. However, the current price is in a downtrend on the daily chart, with significant technical pressure and a short-term risk of a "buy the rumor, sell the fact" scenario.

Key success factors : TAO's value ultimately depends on the actual performance of its subnet ecosystem—127 active subnets and 4,000+ AI models provide the foundation, but continuous validation of the business model and user demand is needed. Negative funding rates in the derivatives market indicate bullish positions among professional traders, but a 92% liquidation rate of long positions within 24 hours reflects leverage risk.

Operation suggestion framework :

• Conservative approach : Observe the subnet ecosystem verification and price trend reversal confirmation after the halving (daily chart shows a breakout above $305 and a stable hold above that level).
• Balanced strategy : Phased entry, initial position established in the $270-$280 range, stop-loss set below $260, target $320-$350.
• Aggressive strategy : Add to positions ahead of the halving to speculate on supply shocks, strictly control position size and stop-loss ($260), set a target of $400+.

Biggest risk : If the subnet fails to show substantial growth after the halving, the scarcity narrative may become invalid, and prices may face renewed downward pressure. Investment decisions should be based on individual risk tolerance and judgment of the long-term value of AI decentralized networks.